Failing and exiting in social and commercial entrepreneurship: The role of situated cognition

Abstract

This paper explores the decision-making process social entrepreneurs go through when faced with a failing venture, in comparison to commercial entrepreneurs. Findings point towards the role of situated cognition. Using a ‘think-aloud’, scenario-based experiment and two assessments of cognitive effort, our research reveals a unique “person-in-situation” decision-making process in failing situations. The entrepreneurs’ sequences of cognitive activities and cognitive effort are distinctively influenced by the nature of the failing venture as they reach the decision to persist or exit, regardless of the entrepreneurs’ baseline motivations. This is counterintuitive against the predominance of explanations emphasizing the relevance of orientation and intentions to address social needs or maximize profit as well as the role of escalation of commitment in the termination/ persistence decision.