A Research on the Relationship among Entrepreneurial Social

Identity, Decision-making Logic and Entrepreneurial Performance

Chang Li and Chao Shen

School of Business Administration, Zhejiang Gongshang University, Hangzhou, China

Keywords: Entrepreneurial Social Identity, Effectuation, Causation, Entrepreneurial Performance.

Abstract: Entrepreneurial social identity is of great importance for new venture and it has become diversified. Based on

identity theory and effectuation theory, this study explores the relationship between entrepreneurial social

identity, decision-making logic and entrepreneurial performance. Based on the modelling method of

PLS/SEM structure formula, the study makes an empirical analysis of the data from questionnaires. The

results reveals that: (1) Darwinian，Communitarian and Missionary have positive impact on decision-making

logic but the impact is different; (2) Effectuation and Causation have positive impact on entrepreneurial

performance.

1 INTRODUCTION

Under the upsurge of "mass entrepreneurship and

innovation", the people's entrepreneurial enthusiasm

has been fully stimulated. Compared with many

entrepreneurs engaged in entrepreneurial activities

due to the pressure of survival in the early stage of

reform and opening up, more and more entrepreneurs

carry diversified entrepreneurial motivations and

missions in their entrepreneurship. The traditional

dominant logic of constructing organizational

boundaries based on economic efficiency rationality

can no longer be recognized by the new generation of

entrepreneurs adhering to the diversity of identity

roles (Tian 2015). In fact, a distinctive feature of

entrepreneurship is to give entrepreneurs a kind of

autonomy and provide them with a stage to pursue

their dreams. Each entrepreneur has a unique

understanding of his own identity and shows a

behavior pattern consistent with his identity

(Fauchart, Gruber, 2011). As entrepreneurial social

identity tend to diversify, we can’t help but think

about whether different identities have an impact on

entrepreneurs’ decision-making behavior? What kind

of performance difference will this impact bring?

In the process of entrepreneurship, identity is

considered to be a relatively stable prerequisite,

which affects entrepreneurs’ organization

preferences and their decision-making and actions in

the process of entrepreneurial uncertainty and

vagueness (Gruz, et al, 2018). Identity theory can

explain the reasons behind many entrepreneurs'

behaviors, which is of great significance to the

practice of entrepreneurship. The current research on

entrepreneurial social identity mainly focuses on two

aspects: on the one hand, it explains the influencing

factors and construction process of entrepreneurial

identity, and on the other hand, the influence of

entrepreneurial social identity on entrepreneurial

behavior and decision-making. However, the

shortcoming of the existing research is that the

identity of entrepreneurs is determined as a single

identity relative to other groups, and the influence of

different identity types on behavior differences is not

considered (Gruber, Macmillan, 2017). Fauchart and

Gruber (Fauchart, Gruber, 2011) divided the identity

of entrepreneurs into three different types:

Darwinian, Communitarian and Missionary.

Grasping the differences of entrepreneurial social

identity from multiple dimensions can further help

understand the heterogeneity of traditional egoist,

altruistic or pro-socialist entrepreneurs’ behavior and

results in the entrepreneurial process.

This study focuses on the relationship between

entrepreneurs' diversified identities, entrepreneurial

decision-making logic and entrepreneurial

performance, and takes entrepreneurial decision-

making logic as an important intermediary variable.

The research results show that the identity of

Darwinian and Missionary has a significant positive

impact on entrepreneurial performance. The identity

684

Li, C. and Shen, C.

A Research on the Relationship among Entrepreneurial Social Identity, Decision-making Logic and Entrepreneurial Performance.

DOI: 10.5220/0011218200003440

In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 684-687

ISBN: 978-989-758-593-7

of entrepreneurs will affect the use of entrepreneurial

decision-making logic, and different identities will

have different decision-making logics.

Entrepreneurial decision-making logic positively

affects entrepreneurial performance.

2 THEORY AND RESEARCH

HYPOTHESIS

2.1 Entrepreneurial Social Identity and

Decision-making Logic

For entrepreneurs with a Darwinian identity, they are

driven by traditional profit orientation, and their

decision-making is mainly based on the

establishment of a profitable enterprise. This strong

interest in profit motivates them to conduct business

activities by studying technical personnel and

corporate knowledge in the market in order to

develop a competitive new enterprise (Fauchart,

Gruber, 2011). This is consistent with the goal-

oriented principle in causation, which is to determine

in advance a series of goals it hopes to achieve, find

and choose methods to achieve the goals, and base

decision-making on the evaluation of expected

returns (Sarasvathy, et al., 2008). Accordingly, it is

proposed that:

Hypothesis 1: Darwinian identity is positively

related to decision-making logic. Specifically, when

identity is more Darwinian, the decision logic is more

causation.

For entrepreneurs with a Communitarian identity,

they develop new products based on their own

interests and the community’s high attention to the

product or business field (Gruber, Macmillan, 2017).

This process includes collective creative activities

before the user community creates the enterprise

(Alsos, et al., 2016), they take "who am I" and "what

do I know" as the starting point, which is consistent

with the experimental principle in effectuation, that

is, paying attention to existing resources and

methods, and gradually achieving goals in the process

of continuous experimentation. Accordingly, we

propose that:

Hypothesis 2: Communitarian identity is

positively related to decision-making logic.

Specifically, when identity is more toward

communitarianism, the more the decision logic is

toward effect reasoning.

Entrepreneurs with Missionary identity have firm

beliefs and are committed to causing changes in

certain aspects of society

(Fauchart, Gruber, 2011).

Although this goal orientation is not equivalent to the

traditional benefit orientation, they have a clear

understanding of the ultimate goal and focus on what

actions they need to take to achieve this goal

(Sarasvathy 2001), which is consistent with the goal-

oriented principle in causation. In the process of

entrepreneurship, entrepreneurs with Missionary

identity will focus on starting from the resources at

hand under the guidance of goal orientation (Alsos, et

al., 2016), and attach great importance to the

communication and cooperation with stakeholders,

which is consistent with the principle of

experimentation and alliance in effectuation.

Therefore, we believe that entrepreneurs with

Missionary identity are ambiguous in their behavioral

preferences. Hence we suggest that:

Hypothesis 3: Missionary identity is positively

related to decision-making logic. Specifically, when

identity is biased towards Missionary, the more it is

biased towards the combined use of two decision-

making logics.

2.2 Decision-making Logic and

Entrepreneurial Performance

Entrepreneurs who use effectuation can effectively

deal with resource constraints and focus on existing

resources. In addition, they also try to seek the best

results within the range of losses they can afford

(Sarasvathy, et al., 2008), which enables enterprises

to achieve the best possible results with the resources

at hand. Entrepreneurs who adopt causation help new

ventures break resource constraints through efficient

resource management, and collect information about

their competitors and environment in market

competition to formulate coping strategies

(Sarasvathy 2001). Therefore, the following

hypotheses are put forward:

Hypothesis 4: Both effectuation and causation are

positively related to entrepreneurial performance.

3 DATE AND METHODS

3.1 Date

The data used in this study are from the Zhejiang

Entrepreneurship Observation (2018) project of

Zhejiang Gongshang University Zheshang Research

Institute. After deleting invalid questionnaires, a total

of 533 questionnaires for entrepreneurs were

obtained, mainly involving 17 industries including

finance, manufacturing, real estate, and information

transmission. Among them, 50.3% are male, 78.9%

A Research on the Relationship among Entrepreneurial Social Identity, Decision-making Logic and Entrepreneurial Performance

685

are between 18 and 40 years old, 88.6% are less than

36 months old, 44.8% have a bachelor's degree,

77.5% have a household income of 100,000-500,000

yuan, and 53.8% are new entrepreneurs.

3.2 Measures

Entrepreneurial performance adopts a 7-point scale,

with 1 indicating "much lower than the peer

enterprises" and 7 indicating "much higher than the

peer enterprises". Other scales adopt a 5-point scale,

with 1 indicating "strongly disagree" and 5 indicating

"strongly agree". The entrepreneurial social identity

mainly refers to the scale of Alsos (Alsos 2016),

including 9 questions such as "the opportunity to

create economic value and personal wealth is an

important driving force for me to start a business".

Effectuation and Causation, mainly refer to Chandler

et al. (Chandler 2011) and Brettel et al. (Brettel 2012)

to propose two measurement methods, specifically

based on the Chinese scale translated by Qin Jian

(Qin 2011). For the measurement of entrepreneurial

performance, Murphy et al. (Murphy 1996) adopted

the subjective evaluation method with multiple

indicators to measure enterprise performance,

including the actual return on investment, sales

growth, profitability and market share.

Entrepreneurial performance may be affected by

variables such as the entrepreneur’s gender, age,

length of entrepreneurship, education, family income,

etc. Therefore, the above variables are selected as

control variables.

3.3 Reasons for Applying PLS-SEM

First, in the measurement model, the variables

"identity" and "effectuation" in this article are

constitutive variables. Second, the model is more

complex. Therefore, this article conforms to the five-

point rule of thumb for applying PLS-SEM, and it is

advisable to use the PLS-SEM path modeling method

for analysis (Hair, et al., 2012).

4 RESULTS

4.1 Test of Measurement Model

In this study, the combined reliability of effectuation

(flexibility, affordable loss, alliance,

experimentation), causation and entrepreneurial

performance are 0.838, 0.906, 0.8230, 0.837, 0.889

and 0.854, respectively, which are all higher than the

base value of 0.70. AVE are 0.564, 0.763, 0.538,

0.632, 0.535, and 0.594, which are all greater than the

benchmark value of 0.50. Both showed that the

measurement is credible and that the structure of the

latent variable can explain at least 50% of the project

variability. The load of all items is between 0.7 and

0.9, which are all greater than 0.7, which is within the

acceptable range. In addition, the square root of latent

variable AVE in this study is greater than the

correlation coefficient between latent variables,

indicating that the measurement model has good

discriminative validity.

According to the suggestion of Hair (Hair 2012),

the weight of the constitutive index is greater than 0.2

and significant, and the VIF is less than 10 when

checking the collinearity among indicators,

indicating that all the constitutive indexes in the

model have good validity. In this paper, the weights,

VIF and T values of "identity" and "effectuation" all

meet the requirements.

The model evaluation of PLS-SEM needs to

include the goodness of fit (R

) indicating the degree

of explanation of the independent variable to the

dependent variable. In this study, the R

effectuation, causation and entrepreneurial

performance are 0.401, 0.255 and 0.273, which have

high goodness of fit.

4.2 Hypothetical Test

Figure 1: Hypothetical model test results

As shown in Figure 1, the preference for using

decision-making logic for different identities shows

that Darwinian identity is positively correlated with

effectuation (β=0.296, P<0.001) and causation

reasoning (β=0.275, P<0.001), partially supporting

H1. Communitarian is positively correlated with

effectuation (β=0.302, P<0.001) and causation

(β=0.208, P<0.001), and the positive relationship

between communitarian and effectuation is more

significant. H2 is supported. Missionary are

positively correlated with effectuation and causation,

and there is no significant difference. H3 is

supported. Both effectuation (β=0.29, P<0.01) and

causation (β=0.13, P<0.05) are positively correlated

with entrepreneurial performance, which supports

H4.

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5 DISCUSSION AND

CONCLUSION

This study focuses on the relationship between

entrepreneurial social identity, entrepreneurial

decision-making logic and entrepreneurial

performance, and takes entrepreneurial decision-

making logic as an important intermediary variable.

The research results show that: (1) The three

identities have a positive and significant relationship

with effectuation and causation, but the significance

test results show Darwinian has no big difference in

the two decision-making logics. Communitarian

prefers to use effectuation, and missionary prefers to

use causation. (2) Whether it is effectuation or

causation, it has a positive impact on entrepreneurial

performance.

This study makes several important contributions.

First, this paper introduces three typical types of

entrepreneurial social identity to study how different

types of identity affect entrepreneur behavior and

performance, and to further understand the

heterogeneity of the behavior and results of

traditional egoist, altruistic or pro-socialist

entrepreneurs in the entrepreneurial process (Gruber

and Macmillan 2017). Second, this study also verifies

that entrepreneurs explain their actions based on their

identity rather than preferences or goals proposed by

Sarasvathy and Dew (2005), which enriched the

understanding of entrepreneurial behavior and

performance heterogeneity. Finally, this study shows

that identity difference can influence entrepreneurs'

decision-making logic choice preference, which

contributes to the further exploration of the

antecedent variables of effectuation and causation.

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