Academic journal article Journal of Business and Entrepreneurship

Entrepreneurs in High Velocity Environments: Leveraging Cognitive Independence

Academic journal article Journal of Business and Entrepreneurship

Entrepreneurs in High Velocity Environments: Leveraging Cognitive Independence

Article excerpt

ABSTRACT

This paper posits that entrepreneurs can operate successfully in high velocity environments by developing cognitive models that compensate for their lack of demographic diversity. To address this issue, we propose a new model of managerial impact on firm performance and action that separates cognitive models from demographic and psychological characteristics.

Organizational environments are increasingly characterized by turbulence emanating from many sources. Effectively coping with this turbulence places exceptional demands on top managers of these organizations. Upper echelons (UE) research on high velocity environments, environments characterized by growing complexity and rapid change, centers on the assumption that the intensified complexity in the environment can be met by the diverse attributes and capabilities of a team of managers (Bourgeois, 1985; Eisenhardt & Bourgeois, 1988; Haleblian & Finkelstein, 1993; Sanders & Carpenter, 1998; Simons et. al., 1999). These studies suggest that firms that involve multiple managers with diverse characteristics in decision making will outperform those that do not in high velocity environments.

However, entrepreneurs running smaller firms often make decisions on their own, without the input of a top management team, or perhaps with a very thin management team. In this scenario, it is important for entrepreneurs to overcome the limitations inherent in being sole decision makers in order to compete effectively in turbulent environmental conditions.

Entrepreneurs may cope with the lack of team decision making input by hiring outside advisors for major decisions, but the increased cost and time concerns limit this option. Typically, entrepreneurs operating in high velocity environments must find within themselves the necessary mix of attributes and capabilities to ensure their firms' success. Throughout this paper we address the conditions facilitating entrepreneurial success from the perspective of the decision maker, with the understanding that successful decision making by the entrepreneur leads to success for the entrepreneurial venture or small business.

We propose that no single manager can possess all the necessary demographic attributes that would suggest success in high velocity environments. For example, UE theory suggests that younger, less tenured managers have certain advantages in dealing with high velocity environments, while older, more tenured managers enjoy other advantages. Obviously, a manager cannot be both young and old at the same time, nor can they have both short and long tenures. This suggests that managers must somehow compensate for the characteristics they do not possess. The framework developed here proposes that successful managers in high velocity environments develop a repertory of mental models that are not necessarily linked to their demographic profile or psychological characteristics. In simple terms, a young manager also must learn to think like a veteran, and a long tenured executive must also develop the mental models associated with a newcomer.

This framework is a significant departure from the traditional upper echelons model that posits that demographic and psychological characteristics are tightly associated with mental models. Figure 1 contrasts the traditional model (adapted from Hambrick & Mason, 1984) with our cognitive independence model.

BACKGROUND

High Velocity Environments

The external environment clearly is a significant driver of strategic change (Ginsberg, 1988; Meyer, Brooks, & Goes, 1990). However, environmental conditions may range from the relative stability of some regulated industries to extraordinary turbulence in others (Bourgeois, 1985). Recently, volatile environments have been characterized as hyperturbulent (McCann & Selsky, 1984; Meyer, Goes, & Brooks, 1993), high velocity (Bourgeois & Eisenhardt, 1988), or hypercompetitive (D'Aveni, 1994). …

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