Entrepreneurial scripts and the new transaction commitment mindset: extending the expert information processing theory approach

In this study, we extend the expert information processing theory approach to entrepreneurial cognition research through an empirical exploration of the new transaction commitment mindset among business people in Canada, Mexico, and the United States. Using analysis of covariance, multivariate analysis of variance, and hierarchical regression analysis of data from a cross-sectional sample of 417 respondents, our results provide a foundation for additional cross-level theory development, with related implications for increasing the practicality of expert information processing theory-based entrepreneurial cognition research. Specifically, this paper: (1) clarifies the nature of the relationship between entrepreneurial expert scripts and constructs that might represent an entrepreneurial mindset at the individual level of analysis; (2) identifies analogous relationships at the economy level of analysis, where the structure found at the individual level informs an economy-level problem; (3) presents a North American Free Trade Agreement-based illustration analysis to demonstrate the extent to which cognitive findings at the individual level can be used to explain economy-level phenomena; and (4) extrapolates from our analysis some of the ways in which script-based comparisons across country or culture can inform the more general task of making information processing-based comparisons among entrepreneurs across other contexts.

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Since the idea that entrepreneurs use expert scripts to process information differently than novices was first introduced into the literature (e.g., Mitchell, 1994), there has been considerable development of this branch of research within the larger body of entrepreneurial cognition literature (e.g., Englebrecht, 1995; Gustafsson, 2004; Mitchell & Chesteen, 1995; Mitchell, Smith, et al., 2002; Mitchell, Smith, Seawright, & Morse, 2000). During this time, the view has emerged that expert scripts in entrepreneurial decision making suggest a global culture of entrepreneurship (Mitchell, 2003; Mitchell et al., 2000, 2007; Mitchell, Smith, et al., 2002)--a view that envisions a surprisingly pervasive entrepreneurial "mindset" (McGrath & MacMillan, 2000). We believe this can be a provocative idea, with a substantial contribution to the literature, if generalized beyond the individual level of analysis, and if made relatively easy to apply. However, such generalization and application requires several questions to first be addressed: (1) At the individual level of analysis, what is the nature of the relationship between entrepreneurial expert scripts and constructs that might represent an entrepreneurial mindset? (2) Are there analogous relationships at higher levels of analysis (e.g., the economy level) where the structure found at one level (e.g., expert scripts' relationship to entrepreneurial-mindset-type constructs) is useful to understanding structure at another? (3) To what extent can cognitive skills found at the individual level be used to explain other-level phenomena? (4) How can script-based comparisons across country or culture inform the more general task of making information processing-based comparisons among entrepreneurs across many contexts (e.g., age, education, gender, industry, recency of immigration, religion, etc.; see e.g., Shane, 1996)?

While our proposed approach to answering the above questions is intended to be neither exhaustive nor dispositive of the issues raised, it is nevertheless our intention to do some of the "heavy lifting" necessary to make the expert information processing-based approach to the study of how entrepreneurs think (Mitchell et al., 2007) more comprehensive and more accessible to researchers in the community of entrepreneurial cognition research. To do this, we: (1) utilize a portion of an earlier-reported primary data set (Mitchell et al., 2000) in a unique manner: as a peer-reviewed secondary-type data set that provides a foundation of base credibility that enables us, with minimal repetition, to effectively address the above questions; and (2) employ the sequential technique of first testing two foundational hypotheses, which then permits us to engage in the post hoc analysis required to address the four research questions.

In setting the boundaries of the study, we therefore adopt the stance that the information processing of entrepreneurs is distinct, that it is malleable (i.e., affected by deliberate practice, e.g., Baron & Henry 2006, and others; Englebrecht, 1995; Mitchell, 2005), and that its content at a given point in time (Walsh, 1995) can be measured by language-based methodologies, such as script--cue recognition and protocol analysis, as well as physiologically (Ericsson, 2002). This stance also necessarily embodies the position that entrepreneurship's association with information processing is not in doubt (please see Mitchell et al., 2007, for a summary). We adopt terminology as developed in the expert information processing literature as it has been applied in the field of entrepreneurship, and, as our argument develops, we set forth these terms. We also assume that levels of analysis can be conceptualized using a "bundling" logic (e.g., Penrose, 1959, pp. 65-87: the firm as a set of indivisible resource bundles) or an aggregation logic (e.g., Mitchell, 2001: the firm as an aggregation of transactions and the economy as an aggregation of firms).

The article proceeds as follows. First we situate and present our conceptual model. We then report the testing of this model, with its associated two hypotheses to provide a baseline for conducting exploratory post hoc analysis for purposes of addressing the cross-level and accessibility-enhancing questions this study is intended to inform. Next we discuss the multi-level implications of our results by demonstrating how the compositional process similarities (e.g., Chan, 1998) found in the study at the individual level of analysis can help researchers to understand interrelationships at another level of analysis, and, for this task, we explore an economy-level illustration in which we offer a new value creation interpretation of the disputes and public policies surrounding the North American Free Trade Agreement (NAFTA) using compositionally consistent inference from individual-level analysis. We conclude by discussing research and practical implications.

Conceptual Development

We begin discussion of our conceptual model by explicitly grounding the analysis in the context of entrepreneurial outcomes. In this analysis, we broadly consider the outcome of entrepreneurship to be "new value creation." To bound and define new value creation for the purposes of this study, we first define what is meant by the term value, and then examine its creation. Value is said to exist in two forms: use value and exchange value (Bowman & Ambrosini, 2000; Lepak, Smith, & Taylor, 2007). Use value is defined to be the "specific quality of a new job, task, product, or service as perceived by users in relation to their needs" (Lepak et al., 2007, p. 181), as expressed in some combination of functional, experiential, or symbolic utility (Smith & Colgate, 2007). Exchange value is defined to be the "monetary amount realized at a certain point in time, when the exchange of the new task, good, service, or product takes place" (Lepak et al., p. 181), which takes into consideration the costs and sacrifices of producing and selling the unit of exchange and of buying and using it (Smith & Colgate). Of course, exchange value is made possible by the existence of use value. Hence arises the question: How is new use value created?

Herein we use the longstanding and predominant Schumpeterian explanation of the process whereby value is created (e.g., Hitt, Hoskisson, Johnson, & Moesel, 1996; Moran & Ghoshal, 1999; Tsai & Ghoshal, 1998). Schumpeter (1928) asserts: "economic progress means essentially putting productive resources to uses hitherto untried in practice, and withdrawing them from the uses they have served so far. This is what we call 'innovation'" (p. 378, emphasis in original). In this sense, new value creation as seen through the lens of economic progress is innovation, where new use value is created wherever productive resources are put to uses hitherto untried in practice (Mizik & Jacobson, 2003). Mitchell (2005) further bounds and defines this innovation-based explanation of new use value creation by suggesting that new value is created through entrepreneurial thinking that creates an innovative work that is perceived by other actors in the marketplace to have use value. As a result of these perceptions of value by others, a new exchange (transaction) is thereby facilitated between actors. We adopt a similar approach. In our study, we define new value creation (in these transaction-based terms) to be: the creation of a useful (valuable) work for purchase by others in the marketplace. This creation of new value can occur at multiple levels of analysis (Lepak et al., 2007; Mitchell, 2001), whether it be at the individual level (e.g., the venture creation decision) or at the economy level (e.g., through policy, regulation, etc.), which enable productive resources to be put to hitherto untried uses.

So our basic approach to expanding the usefulness of the expert information processing theory-based stream of research is to focus on structural relationships in the conceptual model as they relate to new value creation. By structural relationships, we mean the antecedent and consequent features of theory-based constructs in their sequential relationship to each other. Consistent with cross-level research concepts (Chan, 1998), we propose to further extend theory by showing how process structure found at lower levels of analysis can have analogous process structure at a higher level of analysis, enabling cross-level inferences. In this next section, we therefore establish first the fundamentals of cross-level structural comparison and provide the model setup--the literature foundations, constructs, and the proposed sequential fundamental relationships that comprise the conceptual model at the individual level of analysis. Second, we present our arguments for the relationships that will be tested as hypotheses, and lay the foundation for the post-hoc analysis that reveals compositional process similarities with analogues at the economy level.

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