The Homo agens in a Socio-Economic Context
8.1 The Cognition Process from a Psychological Perspective
8.1.2 Determinants of Human Behavior in a Dynamic Environment—
Perception, Creation and Evaluation of New Technological Potentials So far, we have considered the cognitive process of a bounded rational agent in a static context. Agents learn about their technological and eco-nomic environment, so that an adjustment in behavior may be induced. But, considering learning within the economic process, we have to take into account a dynamic environment.
Learning to ride a bike is different from learning within the economic process, especially with regard to entrepreneurial behavior. The former describes a learning
process by given facts: the aspiring candidate, who wants to learn how to ride a bike, has to cope with given facts of nature, with irrevocable natural laws that constitute reality.37 The economic reality, however, is different. Economic behavior means subjective perception and social interaction. Actors recognize their economic environment but, on the other hand, they create their economic reality since they take part in the economic process by being consumer, producer or entrepreneur, respectively.38 With social interaction, we obtain a reciprocity of the agent as an observer and a creator of reality.
Actors adjust their behavior to their mental model about real economic processes. Doing this, they influence the mental model of others who assimilate this change of the dynamic environment to finally adjust their own behavior. In conclusion, economic behavior goes beyond mere stimulus-reaction behavior and even more beyond simple adjustment processes to synchronize one’s mental model with reality; the economic agent, the learning individual as an observer of the economic reality, takes an active part in creating economic reality itself. Thereby, the most influential agent in this creative process may be considered to be the entrepreneur.
In the last section, we discussed the cognition process of agents. While they learn about new technologies and obtain new knowledge, economic behavior might be adjusted, provided the actor senses a cognitive dissonance. Thus, the environment has an impact on economic behavior. This influence, however, is not a unilateral one. Economic behavior is no persistent law of nature—though this seems to be true for some basic patterns of economic behavior, because every agent adjusts behavior to the economic sphere which he himself is a part of (bimodal ontology). The social context influences economic behavior as much as economic behavior influences economic reality. To incorporate those aspects, the findings of social psychology will be discussed briefly.
Social psychology puts the human cognition process into a social context. It studies
“(…) how people think about, influence, and relate to one another.”39 Human cognition is not simply a one-way process in adjusting one’s behavior to a static environment The behavior of individual A influences the behavior of another individual B and vice versa, opening up room for strategic and manipulative behavior to twist social and economic reality. The social context is crucial for our behavior. The social surroundings influence our self-awareness: in a group, we become self-conscious of our qualities that make us different to other members of the group, such as being a black among white people or being a high-skilled among unskilled workers. Self-interest dyes our social judgement attributing the responsibility for certain undesirable events to others, whereas making oneself more responsible for successful ones. The desire to belong to a certain group or at least to leave a certain impression on a group, our self-concern, makes us adjust one’s behavior in a way that induces a certain social behavior. For instance, politicians try to understand the voters’ needs during a campaign to get the majority vote. Without considering the social context of an individual, it seems to be impossible to predict a certain (economic) behavior. Even the individual himself often has a hard time predicting his own behavior.40 It is not always obvious to the individual what has been influencing his performed behavior. Sometimes, he might not even be able to explain his behavior to others. Nevertheless, the individual’s self-concept is critical in decision making and performance. His self-esteem, his evaluation of his self worth, determines his appraisal of his traits and abilities. Ruvolo and Markus (1992) corroborated the hypothesis that people with a high self-esteem, with a positive appraisal of themselves, outperform others with a
Entrepreneurship 80
members increases their self-efficacy so that the group’s collective efficacy, the group’s belief in their comprehensive competencies and capabilities, exceeds the sum of the individuals’ self-efficacy.42 As a conclusion, some decisions become more likely to be made as a group decision compared to a decision in isolation. Hence, symmetry breaking in behavior can be observed.43 Considering the decision to found a firm, such kind of decision requires high self-esteem and self-efficacy, a decision which is more likely to be made as a group.
So far, we discussed the individuals’ and contextual determinants of a decision- making process. In the following, we will discuss the phenomenon of the self-serving bias, a psychological aspect that reinforces self-efficacy and, consequently, certain behavior.
As we process self-relevant information, a potent bias intrudes. We readily excuse our failures, accept credit for our successes, and in many ways see ourselves as better than average. Such self-enhancing perceptions enable most people to enjoy the benefits of high self-esteem, while occasionally suffering the perils of pride.44
Despite inferiority complexes, which seem inherent to all of us,45 there is evidence to the tendency that we perceive ourselves favorably.46 Positive events are attributed to oneself, whereas negative events are attributed to others or to given circumstances.47 When people evaluate themselves in comparison to others, they rank themselves higher than average in almost any dimension which is subjective and socially desirable. This phenomenon is even more pronounced when someone compares himself to unknown individuals.48 Most business managers for example rank their performance higher than their average peer.49 Similarly, when evaluating future events, Weinstein (1980) detected an unrealistic optimism about future life events. Irrespective of the questions individuals were asked, such as future job search, risk of HlV-infection, probability of getting divorced, etc., most evaluated themselves to have better chances to desirable future events than others.50 Concerning an individual’s opinion about what others think, we observe the so-called false consensus effect. The extent to which other people agree to one’s own opinion tends to be overestimated by individuals.51 In the same way as people assess their abilities and desirable or successful behaviors, the individual that fails tends to consider his failure to be common to all, such as “accidental” tax evasion. On the contrary, virtues and successful behaviors, he considers to be unique to his person (false uniqueness effect).52
McClelland (1961)53 is one of the first who profoundly analyzed the social and cultural context of potential entrepreneurs and thus brings in a social-psychological aspect into the entrepreneurship discussion. He investigated the (social) psychological aspects of the achieving society and conjectured a basic motivation, a need for achievement within stereotypical societies; societies in which typical, cultural and societal values are transferred via socialization and education, so that as a result, a fundamental tendency towards entrepreneurial behavior becomes evident in society.54