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Document 1 of 1 Physiological Emotions and Entrepreneurial Decisions Author: Sundararajan, Malavika ProQuest document link Abstract: This paper focuses on the impact of the first bodily emotional reaction (blood-pressure and heart rate)in individuals when they go through the opportunity recognition process in the presence or absence of priorknowledge and prior entrepreneurial experience. This study uses an experimental approach to measure bloodpressure and heart rates of individuals when they are presented with entrepreneurial scenarios. The samplepopulation comprised of ninety undergraduate and graduate students in a Northeastern technology baseduniversity in USA. In addition to the physiological measures, a questionnaire was also used to collect data aboutthe participants' prior knowledge and experience. Structural Equation Modeling was used to analyze therelationships between the physiological emotions, prior knowledge and experience and decision to develop theopportunity. A significant impact of blood pressure on the decision to develop the business opportunity,specifically between groups which had higher and lower prior knowledge and experience, was observed. Full text: Headnote Abstract Purpose - This paper focuses on the impact of the first bodily emotional reaction (blood-pressure and heart rate)in individuals when they go through the opportunity recognition process in the presence or absence of priorknowledge and prior entrepreneurial experience. Design/methodology/approach - This study uses an experimental approach to measure blood pressure andheart rates of individuals when they are presented with entrepreneurial scenarios. The sample populationcomprised of ninety undergraduate and graduate students in a Northeastern technology based university inUSA. In addition to the physiological measures, a questionnaire was also used to collect data about theparticipants' prior knowledge and experience. At the start of the experiment, after they consented to participate,the participant's blood pressure and heart rates were examined and observed at three different times during theopportunity recognition exercise. Structural Equation Modeling was used to analyze the relationships betweenthe physiological emotions, prior knowledge and experience and decision to develop the opportunity. Findings - A significant impact of blood pressure on the decision to develop the business opportunity,specifically between groups which had higher and lower prior knowledge and experience, was observed. Practical implications - The study provides a good idea of "how" opportunity recognition might be taking place,thus allowing entrepreneurs to understand the importance of being aware of their own emotional reactions tosituations before they take important decisions about developing a newly recognized opportunity hencereducing the chances of new venture failures. Originality/value - This is one of the first research studies that measures physiological reactions like heart rateand blood pressure in the context of entrepreneurial decision making. It thus provides a significant objectivemeasure, compared to earlier subjective self-reporting measures, about entrepreneurial processes. Keywords: Opportunity Development, Physiological Emotions, Decision Making Paper type: Research Paper Introduction In order to create a new venture the opportunity has to be discovered and the entrepreneur has to make achoice whether to exploit it or not (Shane and Venkatraman, 2000). While entrepreneurial processes begin withintent to start a new business (Krueger, 1993; Krueger and Brazeal, 1994), it has been suggested that the cruxof the entrepreneurial process, is the opportunity recognition and development ability of entrepreneurs whichdifferentiates them from non-entrepreneurs (Venkataraman, 1997). The creation of successful businesses only

follows a successful opportunity development process (Ardichvilli, Cardazo and Ray, 2003). Understanding howthe Opportunity Recognition process occurs will help extend current theory and provide entrepreneurs withinsights regarding their decision making abilities increasing the likelihood of repeated success. The Opportunity Recognition process has thus far been elucidated by examining cognitive factors with thestrongest evidence being for prior knowledge and experience. Prior knowledge and experience can however,create mental ruts making it more difficult for entrepreneurs to recognize innovative opportunities (Shepherdand Detienne, 2005). Further the entrepreneur's passion and perception of the business as his or her own baby(Cardon, Zeitsma, Saparito, Matherne, Davis, 2005), and motivation (Karp, 2006) also contribute to thedevelopment of the opportunity. This would mean that the development of a business opportunity depends a loton whether the entrepreneur likes the idea or not. Entrepreneurship is thus, a recurring pattern of both thoughtsand feelings that shape entrepreneurial reality and therefore action and value creation (Karp, 2006). Emotionsundoubtedly provide evaluative information and supply energy for motivational behavior in the entrepreneur(Ford, 1999). Considering that the neural systems of emotions interact extensively with their underlyingcognitive processes (Gray, Schefer, Brower and Most, 2005) there is a definite need to include the study ofaffect in the field of entrepreneurship (Baron, 2007) in order to fully understand the venture creation process.Since the most significant evidence has been for prior knowledge and prior experience the research question is:Given that someone has prior knowledge and prior experience, will the same individuals be affected differently ifthey experience changes in blood pressure and heart rate due to positive versus negative emotions in aparticular situation to the point that their decision to develop is different? Even though many cognitive and emotional factors have different brain regions, there are certain regions of thebrain that have definitely been shown to cater to both cognitive and emotional mechanisms namely theindividual's ability to make personal judgments in decision making and the expression of feelings (Bechara,Damasio and Baron, 2007; Damasio, 2003). This highlights the importance of the role of emotions in thedecision making stage of the opportunity recognition process. Emotions may be categorized as physiological,secondary or core emotions (Damasio, 2003; Russell and Barrett, 1999). The first type of emotional responsehowever, is most relevant to this study since it is an immediate bodily (physiological) reaction that tells theindividual whether they like the object or do not like it (Chauduri, 2006) and since we are measuring the decisionmade at a moment in time, the primary reaction that will impact the decision is the immediate physiologicalresponse. The long term objective of this research is to contribute to an understanding of the role of all types and levels ofemotions in each stage of the opportunity recognition process, however for the purpose of this study only thedecision to develop stage and the impact of the first emotional response is investigated. Keeping this aspect inmind the study builds a theoretical framework from the literature in entrepreneurship, cognition and emotions todemonstrate the potential significant impact of physiological responses on the decision to develop a businessopportunity. Review of Literature Opportunity Recognition In this study opportunity recognition refers to the active, cognitive process (or processes) through whichindividuals conclude that they have identified a business idea that has the potential to create something new,that has the potential to generate economic value, and one that is viewed as desirable in the society in which itoccurs (that is, its development is consistent with existing legal and moral conditions) (Baron, 2004). Opportunities are recognized to be both a result of information available about the environmental conditionssuch as market trends, technology availability, and the result of the entrepreneur's cognitive ability to acquireand process information (Ucbasaran, Westhead, and Wright, 2000). Reviewing the entrepreneurial cognition research we find that the key cognitive aspects outlined in theopportunity recognition literature are as follows: Prior Knowledge and Experience (Shepherd and Detiene, 2001;

Shane, 2000); Regulatory focus theory (Baron, 1999); Risk perception (Forlani and Mullin, 2000; Simon,Houghton and Aquino, 2000); Counterfactual thinking (Gaglio, 2004; Baron, 1999); Planning Fallacy (Keh, Foo,Lim 2002; Baron, 1999); Law of Small numbers (Keh, Foo, Lim 2002); and even some psychological factors likemotivation, creativity and intention (goals) (Bird, 1992; Krueger, 1993; Hostager Neil, Decker and Lorentz, 1998;Hills, Schrader and Lumpkin, 1999). When it comes to specifically recognizing opportunities, however studying the impacts of cognitive mechanismsmerits rigorous investigation because these explain how entrepreneurs think and reason as they identifyinnovative opportunities (Gaglio, 2004). While opportunity recognition occurs in several stages it also occursthrough an iterative and interactive process between the entrepreneur and the environment. As theentrepreneur uses his or her prior knowledge (Shane, 2000) or creativity (Hill, 1995) and mentally evaluates hisor her environment (Kirzner, 1997) what is actually occurring is a set of cognitive processes in the form ofperception, recall and use of memory, appraisal, assessment and interpretation. These processes then result injudgments and decisions that lead the entrepreneur to decide to start a new venture. The Link between Prior Knowledge and Experience and Emotions Prior knowledge and prior experience are tacit knowledge, and along with values and action processes,emotions are also a part of tacit knowledge (Siedler de-Alwis and Hartman, 2004). Emotions can thus serve asan interrupt signal when one's progress towards a goal is better than expected leading to positive affects, orworse than expected leading to negative affects (Oatley and Johnsson-Laird, 1987). Emotions enhanceepisodic memory for events (Christianson, 1992). One adaptive function of emotion is to enhance storage ofepisodic memories so that events that are linked to an emotional response and are potentially important forsurvival are not forgotten (McGaugh, 2000). This means that over time we are more likely to rememberemotional events than neutral events. Such event/object associated emotions are triggered during theevaluation stage of the opportunity recognition process. The cognitive theorists (Roseman, 2001; Scherer,2001), state that evaluations of situations/objects are expected to give rise to a range of emotions from anger,fear and shame to happiness, pride and joy in the individual appraiser. This indicates that the presence of priorknowledge and use of cognitive biases and heuristics (which may be to manage information overload) onlyprovides one half of the story. Emotions thus bring to light, how the opportunity is recognized whenentrepreneurs evaluate their environment before making a decision. Emotions play the role of information providers telling entrepreneurs if they like/don't like an idea. This occursfirst through bodily reactions that affect them physiologically. Next it occurs by eliciting positive or negativeemotions and by influencing their drive and motivation to go ahead or not go ahead with the idea. In order tofully explore these emotions we next look at a detailed review of each of these emotional responses. Based onthat review the research model of the role of emotions in the opportunity recognition process is put forth. Emotions "Emotions allow organisms to cope successfully with a variety of objects and situations that are potentiallydangerous or potentially advantageous. The adaptive value of feelings comes from amplifying the mental impactof a given situation and increasing the probabilities that comparable situations can be anticipated and plannedfor in the future so as to avert risks and take advantage of opportunities". ... Damasio (2003). Following Damasio's work (Damasio, 1994; 1999; 2003) emotions are understood to be a collection of changesin body and brain states governed by a dedicated brain system that responds to the content of our perceptionsof a particular occurrence. In this study our link to understanding emotions is its association with the cognitive processes in the opportunityrecognition process. This means emotions either inform, or are impacted in turn by what the individual becomescognizant of hence we base the reasoning and model of emotions on the above-mentioned definition ofemotions as described by Damasio (1999). Physiological Basis of Emotions

The James-Lange Theory of emotion, proposed in 1884, suggests that emotions occur from our cognitiveappraisal of the commotion that occurs in our inner organs during certain vigorous behaviors. It primarily refersto the physiological events such as muscular tension, heart rate increase, perspiration, dryness of the mouth,etc. that cause emotions rather than the other way round. Diametrically opposite to the James-Lange Theory isCannon's theory proposing that it is in fact emotions that are felt first which give rise to physiological changes.Chaudhuri (2006) and Buck (1999) combined the various theories of emotions and proposed three differenttypes of emotional responses, namely: 1) Emotional responses that are an outcome of physiological responseslike heart rate changes, blood pressure and sweating, which are altered in order to support action. 2) Emotionalresponses that are spontaneous, expressive behavior such as facial expressions, gestures, posture, whichserve the function of social coordination and 3) Emotional responses that are immediate and direct subjectiveexperiences, although they may be experienced indirectly as feedback from cognitive appraisals. For the purpose of this study, we are only looking at the physiological emotional responses since we aremeasuring the immediate impact of the scenario on the individual's decision making process. Physiological Emotional Responses- Measurement and Findings Clinical studies (James, Yee, Harshfield, Blank, Pickering, 1986; Shimomitsu, Theoreil, 1996; Pury, McCubin,Helfer, Galloway, McMullen 2004) have shown that physiological responses to negative emotions usually resultin elevated systolic or diastolic blood pressure and lowered blood pressure is related to happiness and positiveemotions. When it comes to physiological reactions to their immediate environment, heart rate significantlyincreases for entrepreneurs versus non-entrepreneurs when they are in the process of recognizing anopportunity to be good (Craig, Lindsay, Kropp and Moores, 2000). Negative emotions are related to higher blood pressure and heart rate, but happiness is inversely related todiastolic blood pressure (Shimomitsu and Theoreil, 1996; Flory, Mathew and Owens, 1998; Shapiro, Jamner,Goldstein and Delfino, 2001; James, et al, 1986). In other studies however, systolic blood pressure (SBP) alonepredicted a significant proportion of the variance in emotional responses to visual stimuli (Pury, McCubin,Helfer, Galloway and McMullen, 2004). The systolic blood pressure when higher, was seen to drop when suchindividuals encountered either positive or negative stimuli. This finding was contrary to an earlier study thatshowed that any sudden unexpected situation can give rise to a vascular response and in such cases therewould be a rise in the blood pressure and drop right immediately after (Randis and Guellette, 1925). In spite ofthe mixed results, we can summarize that individuals with normal resting blood pressures will generallyexperience a drop in their blood pressure if they are encountered with a positive stimuli and experience positiveemotions. While there will be a rise in blood pressure when encountered with negative stimuli leading them toexperience negative emotions. Explanation of the role of emotions in the opportunity recognition process From the entrepreneurship literature we identified two key cognitive factors that have repeatedly been shown toimpact the opportunity recognition process. These are prior knowledge and prior experience and from theemotions and neuroscience literature we identified basic physiological emotional responses that interact withthese cognitive processes. When the individual is placed in a situation that has triggers or stimuli in theenvironment that can foster opportunity recognition, the individual begins to generate several ideas and thenevaluates these ideas before deciding to develop them. In order to recognize this idea as a business opportunity (as in the case of the entrepreneur) the individual willzero in on the idea. At this point there is an immediate reaction which will be a physiological response (Becharaet al, 2007; Chauduri, 2006; Buck, 1999; Craig and Lindsay, 2001; Damasio, 1999; 2003) and in this case it isproposed that it will be a change in blood pressure and heart rate. At this point if they have prior knowledge orexperience in that area they will recall from memory the associated emotion, which if positive will make theindividual feel good about the idea, if negative will make them aversive to the idea. This gradually elicitedemotion, whether positive or negative, will accordingly lead to the individual deciding whether he or she wants to

go ahead or not go ahead with developing the business opportunity further. Based on the above theoreticalunderpinnings the following relationships between the key variables in the opportunity recognition process arehypothesized. Hypotheses Prior knowledge and prior experience have been shown by entrepreneurship researchers as significantindicators of entrepreneurs' opportunity recognition ability (Shepherd and Detienne, 2005; Baron and Ensley,2006). Additionally these researchers have also shown that the feedback about the idea, the learning process at eachstage and the pattern recognition process that aids in connecting of dots, all lead to entrepreneurs being betterat recognizing opportunities. As described above, the first emotional response to an object when it is evaluatedis a bodily or physiological reaction (Randis and Guellette, 1925). Clinical studies have demonstrated differentresults regarding the increase and decrease of systolic versus diastolic blood pressure and heart rate withemotional states. The predominant demonstration however, has been that negative emotions are related tohigher blood pressure and heart rate and positive emotions are related to lower blood pressure and heart rate(Shimomitsu and Theoreil, 1996; Flory, Mathew and Owens, 1998; Shapiro, Jamner, Goldstein and Delfino,2001; James, et al., 1986). We therefore suggest that prior knowledge and prior experience leads to feelings of security making individualsfeel very calm and collected when encountering a familiar situation or object thus decreasing their bloodpressure and heart rate. The lowered blood pressure and heart rate enable greater clarity in thought andcreativity (Tomasino, 2007). However individuals without prior knowledge and experience could feel scared andin fear, their blood pressure and heart rate will increase leading to lack of clarity in thought and lowered taskperformance (Tomasino, 2007; Frederickson, 1998; 2003). We could thus expect to see immediate physiological responses which co-vary with either positive or negativeemotions. Having recognized the opportunity the next step is deciding whether or not to proceed with thedevelopment of the idea. While the above physiological studies have all shown that lowered blood pressure isrelated to positive emotions and increased blood pressure is related to negative emotions, Shwartz, Warren andPickering, (1994) have also shown that after anger which is a negative emotion, it is excitement that leads to thegreatest increase in blood pressure and heart rate while tired states lead to decrease in blood pressure andheart rate. In essence what is expected is that individuals with prior knowledge and prior experience will notalways decide to develop a business and individuals with no prior knowledge and experience can sometimesalso decide to develop a business opportunity. If positive emotions like excitement can also have increased physiological responses, it can energize theindividual to decide to develop the opportunity further, which leads us to hypothesize that: H1: An entrepreneur with high prior knowledge and prior experience who experiences increased blood pressuredue to excitement instead of fear is more likely to decide to develop the opportunity However H2: An entrepreneur with low prior knowledge and prior experience who experiences decreased blood pressuredue to lack of excitement but increased blood pressure due to fear is more likely to decide not to develop theopportunity Methods Shane, (2000), through his study and Gaglio and Katz, (2001) explain that the experimental or quasi-experimental approach opens up an interesting avenue for research in opportunity recognition because suchstudies help us control extraneous variables and focus more on the opportunities recognized. This study usesan experimental approach based on Christensen (2001) and Campbell and Stanley (1963) in order to allow usto control conditions to test the above hypotheses. Dependent Variable

Decision to Develop- Based on the scenario presented and the opportunity recognized as the best businessidea, participants were asked if they intended to develop it or not (on a 9 point scale) based on the method usedby Dimov (2004) and (Reynolds and White, 1997) (alpha=0.84 for this study). Independent Variables Prior Knowledge- Participants were asked to rate how knowledgeable they were in the areas of materialscience, chemistry, nanotechnology on a scale of 1-9 (not at all knowledgeable to very highly knowledgeable)(alpha = 0.68) Prior Experience - Participants were asked to rate how experienced they were in the areas of starting acompany, managing a family owned business, developing a product and market, on a scale of 1-9 (not at allexperienced to very highly experienced) (alpha = 0.84) Physiological Emotions- For this the equipment used to measure the Blood Pressure (BP) and heart ratemanufactured by coulbourn instruments, was used. The procedure included the placement of a cuff over thebrachial artery. The cuff was placed over the upper arm of the participant just above their elbow. The BPmonitor measured the systolic blood pressure, diastolic blood pressure and heart rate (pulse) of the participant.The emotional response was coded as the difference between the base-rate calculated at the start of the studyand at the time of the scenario presentation and averaged with the difference between the base rate and thetime the participants responded to questions about their secondary emotions regarding the scenario. Sample: 90 Undergraduate and graduate students in a northeastern technology based university who enrolledto participate in a raffle driven event comprised the sample of the experimental study, of which all 90 providedfully useable data. Sampling: The sampling took place in a non-systematic manner. Instrument and Procedure: A questionnaire was developed which contains measures to collect data about theparticipants' prior knowledge and experience. At the start of the experiment, after they consented to participate,the participant's blood pressure was examined and observed at three different times during the opportunityrecognition exercise. These included: a) when the participant read the scenario for the first time, b) when theparticipant responded to the questions about how they felt about the scenario, and c) finally just before theycompleted the study and were asked to indicate their prior knowledge and prior experience. Description of Experimental Scenarios In order to control for random knowledge that may be available about other technologies and their application alesser known more recent technology was taken as the main scenario for this study. The scenario describes anew emerging technology discovery namely the carbon nanotubes. An explanation was provided to theparticipants about the properties of the discovery and potential areas of application. Participants were nextpresented with a list of business opportunities. Then based on which idea they thought was the best, they wereasked to decide if they would develop that business opportunity or not. Statistical Analysis Structural equation modeling (SEM) method was used. This method allows us to simultaneously test theregression equations of all the theoretically designed relationships among the identified key variables in thisstudy suggesting to us whether or not the proposed model is significantly acceptable. AMOS was used to carryout the analyses. Results The means and standard deviations of the key variables are listed in table 1. Meeting with all the requirements for structural equation modeling, the data was tested to check for a model fit.The overall model fit the data well (Chi-0.410; p-0.522; RMSEA-0.000; RFI: 0.921). For the overall model, at thetime of presenting the scenario individuals who had high prior knowledge experienced a positive and significantrelationship between systolic blood pressure and decision to develop (Critical Ratio: 2.269). However at the timewhen participants were asked how they felt about the scenario, there was a negative but significant relationship

between systolic blood pressure and decision to exploit the opportunity (Critical Ratio: -2.077). Individuals with low prior knowledge, who experienced a drop in their diastolic blood pressure at the time theywere asked about their knowledge and experience in the related area, decided to develop their opportunity(Critical Ratio:-2.567). Individuals with low prior experience on the other hand had lowered systolic bloodpressure at the time of scenario presentation (Critical Ratio:-2.894) and low diastolic pressure just beforecompleting the study (Critical Ratio:-2.489) and still decided to develop the idea. Individuals with low priorexperience however, also had an increase in systolic blood pressure (Critical Ratio: 3.215) when they werequestioned about their prior knowledge and experience and decided to develop the opportunity further in spiteof no prior experience. The responses were further divided into four groups namely, groups with high/low prior knowledge and groupswith high/low prior experience. Revisiting hypothesis 1 that an individual with increased blood pressure will decide to develop their idea, weobserve that an increase in systolic blood pressure is significant and positive in its relation with decision todevelop the opportunity only for the overall model and only at the time of presenting the scenario. It is significantand negative when the participants are asked how they felt about it or if they had prior knowledge orexperience. Hypothesis 1 is supported only in the overall model for systolic blood pressure but not when theresponses are divided into separate groups, while it is fully supported for the high prior experience group. Hypothesis 2 which states that individuals with low prior knowledge and experience with either decreased bloodpressure due to lack of excitement or increased blood pressure due to fear will not decide to develop their ideais supported in the overall model as well as in the low prior knowledge group model. The additional analysis was carried out to show, how prior knowledge and prior experience directly seem tohave a significant and positive relation with the decision to develop the opportunity. In the high prior experiencegroup however, prior knowledge had no impact on decision to develop and individuals with high priorexperience decided not to develop the recognized opportunity. Discussion According to Damasio (1999; 2000; 2003), Bechara et al (2007), Chaudri (2006) and Buck (1999) the firstreaction to an object in a situation is a physiological response. In this study the bodily reactions were measuredas changes in the blood pressure and heart rate. Unlike the earlier studies, heart rate had absolutely no impacton the decision to develop the idea. Here, what was expected was a rise in blood pressure when individuals hadno prior knowledge and experience, and a drop in their blood pressure when they had prior knowledge andexperience. A change was observed in the systolic blood pressure (SBP) as seen in the Pury et al (2004) study which wasseen to directly have a significant positive relation with the decision to develop the opportunity. The mixedresults indicate that when individuals have prior knowledge about the technology, they are most likely to decideto develop it if they feel excited about the scenario, however if they reflect upon it and do not feel excited theymay decide not to develop the idea. When they have low prior knowledge, instead of excitement if they feel fearand that increases their blood pressure they are not likely to decide to develop the idea. The most important results however are in the models where when in spite of low prior knowledge, theparticipants decided to develop the opportunity alluding to the visceral (animal) nature of an entrepreneur thatmay override rational decision making. This one aspect opens possible explanations for the large number ofnew venture failures. Individuals and nascent entrepreneurs who have no prior knowledge may be wronglymisinterpreting their physiological emotional responses to read as excitement or some kind of gut feeling anddeciding to develop business opportunities even though they are not completely aware of the product. At thesame time, individuals with high prior experience deciding not to develop ideas tells us that entrepreneurs whohave had experience with starting small businesses or in product development are more likely to understandtheir physiological responses and gut feelings to be fear versus excitement when they see a new area that

could potentially be risky. The results thus provide foundational explanations for potential differences betweennascent and serial entrepreneurs as well. The lack of change in heart rate might be due to the fact that the lab setting, although new, was a securelocation and the outcome of the scenario was perceived as non-threatening. The suggestion that entrepreneurstalk about how they get a gut feeling about the opportunity and therefore decide to develop the opportunity issupported by this finding (as seen in the case study results and the study by Hills, Schrader and Lumpkin,1999). Further these results allow us to suggest that, similar to the description provided by Tomasino (2007)about the moment of creativity, the immediate single moment of gut feeling or intuition or physiological responseabout an opportunity experienced by the entrepreneur is a culmination of all that prior knowledge, priorexperience, feelings of confidence about entrepreneurial activities and a range of positive and negativeemotions. When we started this study based on the entrepreneurial cognition literature the empirical evidences in the fieldindicated that entrepreneurs' learning, cognitive scripts, pattern recognition abilities based on their priorknowledge and prior experience alone facilitated the recognition of business opportunities. At this juncture uponcompletion of this study, what we observe is a clear and distinct evidence of the significant role that emotionsplay in the opportunity recognition process, at times even overshadowing the influence of prior knowledge andprior experience. Another aspect we now observe is a clear lack of evidence of consistent impact of priorknowledge and prior experience on their impact on the decision to develop the opportunity. These contradictoryfindings although not conclusive in their outcomes do open the door for further investigation of whether it is infact the opportunity recognition ability that differentiates entrepreneurs from non-entrepreneurs or is it more thedecision to develop the opportunity that forms the root of the entrepreneurial process. If this is indeed the case then the distinguishing characteristic of the opportunity recognition process would bethe decision the entrepreneur takes about: a) whether or not they decide if the appraised opportunity is good ornot and b) whether or not they decide they want to develop the opportunity guiding us to thus understand theimportance of entrepreneurial action as the core of the venture creation process. This aspect suggests that thenext step in this stream of research should extend to including both opportunity exploitation and entrepreneurialaction in order to full capture the "how" part of the entrepreneurial process. Based on these findings one could conjecture that an entrepreneur when faced with a scenario related to his orher prior knowledge and prior experience will get an immediate gut feeling indicated by a physiological responsethat will inform them whether they like the idea or not leading them to their decision to develop the opportunity. Contributions to Research Literature and Education (Value of the Study) One of the most important findings about the study is the empirical evidence for the presence of a physiologicalemotional component in the opportunity recognition process. The study has highlighted the interactions amongthe key cognitive factors prior knowledge and experience, and emotions and the link between emotions anddecision-making. This is a significant finding for the field of entrepreneurship, as it gives a good picture of "how"opportunity recognition may be taking place. It also reaffirms the need to include the emotional component ofthe entrepreneur when studying the outcomes of their decision-making. The findings also tell us that students who do not have knowledge but just some perceived experience willdecide to develop their ideas opening up a whole stream of research that could show the cause of a lot morefailures in new venture creations. Another area of implication is in the field of both neuroscience and psychology wherein the present studyprovides further empirical support for the relation between emotions and decision making. The findings alsoenhance the reliability of the neuroscience emotions and decision making model by showing significant relationsin a new context especially like entrepreneurship and opportunity recognition. For educational programs, this study is a reminder for the need to include both cognition and emotion basedcourses when training nascent entrepreneurs. Training can be provided to entrepreneurship students as well as

entrepreneurs who have failed in the following areas: a) to be aware (stay activated/or mindful) of theirphysiological emotions; b) to quickly double check their knowledge about the opportunity before listening to theirgut feelings; c) to understand the difference between recognizing the opportunities and the factors that shouldlead to the decision of developing the opportunity versus what does in fact lead to their decisions, like falsepositives. Limitations and Future Directions A limitation of the study since we are studying an internal mental process is the dependence on subjectiveaccounts of what takes place in their thought process. Even though objective physiological measures wereincluded in the study further support of the mental processes would be understood better with more imagingtechniques that could explain which brain regions are activated at the point of seeing the scenario andevaluating it and at the point of recognizing the opportunity. Also using ECG will help monitor the most subtlephysiological changes in a continuous manner that would help capture the immediate experiences of theparticipants. This model has to be tested with a larger sample size comparing larger groups of entrepreneurswith non-entrepreneurs. It would have been more informative to see individual's capabilities in different areas,from industries like the food service, information technology, management, marketing and advertising, wherepeople have a lot more knowledge and experience. This aspect would have helped confirm or disconfirm thelack of evidence for consistent results about the relation between prior knowledge and decision making. Conclusion Starting a company is not as hard as it used to be because nowadays the access to information, finances, andsupport systems like incubators and entrepreneurial education programs, blogs and non-profit associations allseem to make it a more realistically achievable goal to most people. Yet the actual opportunity recognitionprocess seems to remain a mystery. Several factors like prior knowledge, experience, learning, alertness havebeen shown to facilitate the opportunity recognition process but understanding how exactly the entrepreneursrecognize opportunities and start new ventures is still a collection of theories. This study provides an initialunderstanding of how the opportunity recognition process may be taking place. The results highlight how eventhough the individuals in the study seem to lack knowledge about an area, just feeling positive about theopportunity whether they understood it or not seemed to lead them to want to develop the idea further. Thisfinding explains that even in the absence of cognitive factors people seem to be willing to go with the emotionsthey experience when evaluating an opportunity. If this is the case then we may have a problem and a solutionat hand for the entire new venture failure literature. Future studies which include all levels and types of emotionsshould focus on testing the emotional awareness of entrepreneurs and its impact on the success of their newventure. During the current economic upheaval "being entrepreneurial" has been touted as the best solution.One must however, understand that the importance of making individuals aware and alert as they go throughthe venture creation process is critical to its success. The end goal for all small businesses of being profitableand sustainable requires, more focus on conscious deliberate practices and less reliance on gut feelings. References References Baron, R. A. (2004)."Potential benefits of the cognitive perspective: expanding entrepreneurship's array ofconceptual tools," Journal of Business Venturing. 19:169- 172. Baron, R. A. (2007). "The Role of Affect in the Entrepreneurial Process," Academy of Management Review.33(2): 328-340. Baron, R.A. (2000). "Counterfactual thinking and venture formation: the potential effects of thinking about whatmight have been," Journal of Business Venturing. 15: 79-92. Baron, R.A. (1998). "Cognitive mechanisms in entrepreneurship: Why and when entrepreneurs think differentlythan other people," Journal of Business Venturing. 13: 275-294. Baron, R.A., &M.D. Ensley (2006). "Opportunity recognition as the detection of meaningful patterns: evidence

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Capability," in Informationen zwischen Kultur und Marktwirtschaft. Proceedings des 9. Ed. Bekavac, Bernard;Herget, Josef; Rittberger, Marc Internationalen Symposiums fur Information swissenschaft (ISI 2004): 373 - 394 Simon, M., S.M. Houghton, and K. Aquino (2000). "Cognitive biases, risk perception, and venture formation:How individuals decide to start companies," Journal of Business Venturing. 15(2): 113-134 Tomasino, D. (2007). "The Psychophysiological Basis of Creativity and Intuition: Accessing "The Zone" ofEntrepreneurship," International Journal of Entrepreneurship and Small Business. 4(5):528-542 Ucbasaran, D., P. Westhead and M. Wright (2001). "The Focus of Entrepreneurial Research: Contextual andProcess Issues," Entrepreneurship, Theory &Practice. 25:57-80 Venkataraman, S. (1997). "The distinctive domain of entrepreneurship research," in Advances inEntrepreneurship, Firm Emergence and Growth, Ed. J.A. Katz 3 Greenwich, CN: JAI Press, 119-138. Wright, W.F. and G.H. Bower (1992). "Mood effects on subjective probability assessment," OrganizationalBehavior and Human Decision Processes. 52: 276-291 AuthorAffiliation Malavika Sundararajan School of Business, North Carolina Central University, USA AuthorAffiliation Corresponding Author Malavika Sundararajan can be contacted at: msundara@nccu.edu Subject: Studies; Physiology; Emotions; Decision making; Impact analysis; Entrepreneurship; Location: United States--US Classification: 9130: Experiment/theoretical treatment; 9520: Small business; 9190: United States Publication title: Global Business and Management Research Volume: 2 Issue: 4 Pages: 310-322 Number of pages: 13 Publication year: 2010 Publication date: 2010 Year: 2010 Publisher: Mehran Nejati Place of publication: Boca Raton Country of publication: Malaysia Publication subject: Business And Economics--Personnel Management Source type: Scholarly Journals Language of publication: English Document type: Feature Document feature: Tables References ProQuest document ID: 916926061

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