Skip to main content
SpringerLink
Log in

Distinguishing unpredictability from uncertainty in entrepreneurial action theory

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

The traditional view that perceived and archival uncertainty measures are substitutable proxies for “true” environmental (entrepreneurial) uncertainty presumes an “all-seeing eye.” Adopting a representationalist epistemology, we distinguish environmental (objective) unpredictability from entrepreneurs’ subjective uncertainty, which has so far been theoretically confounded. It is, in fact, possible for an entrepreneur to be highly certain despite excessive unpredictability and vice versa. Theoretically distinguishing these constructs has fundamental implications for entrepreneurial action theory. For example, because intentional action is consciously originated, unpredictability influences action only indirectly, while uncertainty has direct effects. Outcomes, on the other hand, are directly affected by the complexity and dynamism (unpredictability) of things, whereas uncertainty only has an indirect and tenuous role in what occurs. We develop hypotheses along these theoretical lines and test them on a longitudinal sample of new mobile apps and survey responses from their developers. We find, generally, that unpredictability, uncertainty, and their effects on entrepreneurial action are empirically distinct. This provides added impetus for a shift away from positivism and toward a subjectivist approach to entrepreneurship.

Plain English Summary

Distinguishing Unpredictability from Uncertainty in Entrepreneurial Action Theory. Entrepreneurship scholarship commonly references a single “entrepreneurial uncertainty” construct in discussing the effects of the unknown on entrepreneurial action. We explain that there are not one but two key constructs at play that should not be confounded: external unpredictability and subjective uncertainty. We explain, and support with evidence from the app development industry, that the unpredictability of a market environment or of entrepreneurial outcomes only has indirect influence on actions. It is the entrepreneur’s own uncertainty that drives what actions they will pursue. However, the outcomes that result from action are causally tied to the real unpredictability of the market rather than the entrepreneur’s uncertainty of it. As we move into the theory refinement stage of the entrepreneurship discipline, greater care must be taken in referencing one or the other (or both) in entrepreneurship theory.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. As King (1999) explains, the concept of epistemic emergence in realism cannot coherently rid itself of epistemic dependence. It may be true that an ‘emergent’ social institution cannot be reduced to a single individual. But that an institution is independent of a single individual does not make it epistemically independent, i.e., independent of all individuals. The litmus test for epistemic independence must be whether it can survive the absence of all minds. For example, institutional constraints that impede an individual’s will are, and should be understood as, constraints imposed on that individual by others collectively.

  2. Chia (1996) offers a “postmodern” critique of representationalism, much of which we agree with. However, the representationalism that Chia attacks is not the theory of perception and cognition that we attend to here, but a more extensive “representationalist” (we would call it ‘realist’) metaphysics.

  3. We might put this differently in that the internal/external uncertainty distinction divides the factors that cause uncertainty at the boundary of the skin. But we could just as easily draw that boundary at one’s consciousness, in which case the internal/external distinction would collapse into a single external or “true” uncertainty construct.

  4. Recently, scholars have reexamined Knight’s work and found it to contain both objective unpredictability and subjective uncertainty (Packard, Bylund, & Clark, 2021). It is his use of the term ‘uncertainty’ for both that has arguably been the source of the endless confusion that we herein attempt to resolve.

  5. We draw on a larger data set collected separately with 1.15 million apps listed in Google Play in May 2015 when identifying the ten nearest neighbor apps.

References

  • Aleman, A., & Larøi, F. (2008). Hallucinations: The science of idiosyncratic perception. American Psychological Association.

    Book  Google Scholar 

  • Alvarez, S. A., Barney, J. B., McBride, R., & Wuebker, R. (2014). Realism in the Study of Entrepreneurship. Academy of Management Review, 39(2), 227–231.

    Article  Google Scholar 

  • Anderson, C. R., & Paine, F. T. (1975). Managerial perceptions and strategic behavior. Academy of Management Journal, 18(4), 811–823.

    Article  Google Scholar 

  • Angus, R. W. (2019). Problemistic search distance and entrepreneurial performance. Strategic Management Journal, 40(12), 2011–2023.

  • Ariely, D. (2008). Predictably irrational: The hidden forces that shape our decisions. HarperCollins.

    Google Scholar 

  • Azzouni, J. (2017). Ontology without borders. Oxford University Press.

    Book  Google Scholar 

  • Barlow, M. A., Verhaal, J. C., & Angus, R. W. (2019). Optimal distinctiveness, strategic categorization, and product market entry on the Google Play app platform. Strategic Management Journal, 40(8), 1219–1242.

    Google Scholar 

  • Barron, A. B., & Klein, C. (2016). What insects can tell us about the origins of consciousness. Proceedings of the National Academy of Sciences, 113(18), 4900–4908.

    Article  Google Scholar 

  • Baum, J. R., Locke, E. A., & Smith, K. G. (2001). A multidimensional model of venture growth. Academy of Management Journal, 44(2), 292–303.

    Article  Google Scholar 

  • Bennett, R. C., & Cooper, R. G. (1981). The misuse of marketing: An American tragedy. Business Horizons, 24(6), 51–61.

    Article  Google Scholar 

  • Berglund, H. (2015). Between cognition and discourse: Phenomenology and the study of entrepreneurship. International Journal of Entrepreneurial Behavior & Research, 21(3), 472–488.

    Article  Google Scholar 

  • Bird, B. (1988). Implementing entrepreneurial ideas: The case for intention. Academy of Management Review, 13(3), 442–453.

    Article  Google Scholar 

  • Buchko, A. A. (1994). Conceptualization and measurement of environmental uncertainty: An assessment of the Miles and Snow perceived environmental uncertainty scale. Academy of Management Journal, 37(2), 410–425.

    Article  Google Scholar 

  • Bylund, P. L., & Packard, M. D. (2022). Subjective value in entrepreneurship. Small Business Economics, 58, 1243–1360.

    Article  Google Scholar 

  • Chalmers, D. J. (2004). The representational character of experience. In B. Leiter (Ed.), The Future for Philosophy (pp. 153–181). Clarendon Press.

    Google Scholar 

  • Chater, N., Felin, T., Funder, D. C., Gigerenzer, G., Koenderink, J. J., Krueger, J. I., Noble, D., Nordli, S. A., Oaksford, M., & Schwartz, B. (2018). Mind, rationality, and cognition: An interdisciplinary debate. Psychonomic Bulletin & Review, 25(2), 793–826.

  • Chen, L., Wang, M., Cui, L., & Li, S. (2021). Experience base, strategy-by-doing and new product performance. Strategic Management Journal, 42(7), 1378–1398.

    Article  Google Scholar 

  • Chia, R. (1996). The problem of reflexivity in organizational research: Towards a postmodern science of organization. Organization, 3(1), 31–59.

    Article  Google Scholar 

  • Child, J. (1972). Organizational structure, environment and performance: The role of strategic choice. Sociology, 6(1), 1–22.

    Article  Google Scholar 

  • Chwolka, A., & Raith, M. G. (2012). The value of business planning before start-up—A decision-theoretical perspective. Journal of Business Venturing, 27(3), 385–399.

    Article  Google Scholar 

  • Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10(1), 75–87.

    Article  Google Scholar 

  • Cyert, R. M., & DeGroot, M. H. (1987). Bayesian analysis and uncertainty in economic theory. Rowman & Littlefield.

    Book  Google Scholar 

  • Dess, G. G., & Beard, D. W. (1984). Dimensions of organizational task environments. Administrative Science Quarterly, 29(1), 52–73.

  • Dosi, G., & Egidi, M. (1991). Substantive and procedural uncertainty. Journal of Evolutionary Economics, 1(2), 145–168.

    Article  Google Scholar 

  • Downey, H. K., & Slocum, J. W. (1975). Uncertainty: Measures, research, and sources of variation. Academy of Management Journal, 18(3), 562–578.

    Article  Google Scholar 

  • Downey, H. K., Hellriegel, D., & Slocum, J. W. (1977). Individual characteristics as sources of perceived uncertainty variability. Human Relations, 30(2), 161–174.

    Article  Google Scholar 

  • Duncan, R. B. (1972). Characteristics of organizational environments and perceived environmental uncertainty. Administrative Science Quarterly, 17(3), 313–327.

  • Fayolle, A., & Liñán, F. (2014). The future of research on entrepreneurial intentions. Journal of Business Research, 67(5), 663–666.

    Article  Google Scholar 

  • Felin, T., Koenderink, J., & Krueger, J. I. (2017). Rationality, perception, and the all-seeing eye. Psychonomic Bulletin & Review, 24(4), 1040–1059.

    Article  Google Scholar 

  • Fodor, J. A. (1981). Imagistic representation. In N. Block (Ed.), Imagery (pp. 63–86). MIT Press.

    Google Scholar 

  • Freel, M. S. (2005). Perceived environmental uncertainty and innovation in small firms. Small Business Economics, 25(1), 49–64.

    Article  Google Scholar 

  • Frick, R. W. (1995). Accepting the null hypothesis. Memory & Cognition, 23(1), 132–138.

    Article  Google Scholar 

  • Hastie, R. (2001). Problems for judgment and decision making. Annual Review of Psychology, 52(1), 653–683.

    Article  Google Scholar 

  • Hayward, M. L., Shepherd, D. A., & Griffin, D. (2006). A hubris theory of entrepreneurship. Management Science, 52(2), 160–172.

    Article  Google Scholar 

  • Hoberg, G., & Phillips, G. (2010). Product market synergies and competition in mergers and acquisitions: A text-based analysis. The Review of Financial Studies, 23(10), 3773–3811.

    Article  Google Scholar 

  • Hoberg, G., Phillips, G., & Prabhala, N. (2014). Product market threats, payouts, and financial flexibility. The Journal of Finance, 69(1), 293–324.

    Article  Google Scholar 

  • Hoffman, D. D. (2000). Visual intelligence: How we create what we see. WW Norton & Company. 

  • Hoffman, D. D., & Prakash, C. (2014). Objects of consciousness. Frontiers in Psychology, 5(1), 1–22.

    Google Scholar 

  • Howell, W. C., & Burnett, S. A. (1978). Uncertainty measurement: A cognitive taxonomy. Organizational Behavior and Human Performance, 22(1), 45–68.

    Article  Google Scholar 

  • Johnson-Laird, P. N. (1983). Mental models: Towards a cognitive science of language, inference, and consciousness. Harvard University Press.

  • Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.

    Google Scholar 

  • Kahneman, D., & Tversky, A. (1982). Variants of uncertainty. Cognition, 11(2), 143–157.

    Article  Google Scholar 

  • Knight, F. H. (1921). Risk, uncertainty and profit. Hart, Schaffner, and Marx.

    Google Scholar 

  • Koenderink, J. (2014). The all seeing eye? Perception, 43, 1–6.

    Article  Google Scholar 

  • Kolb, F. C., & Braun, J. (1995). Blindsight in normal observers. Nature, 377(6547), 336–338.

    Article  Google Scholar 

  • Kreiser, P., & Marino, L. (2002). Analyzing the historical development of the environmental uncertainty construct. Management Decision, 40(9), 895–905.

    Article  Google Scholar 

  • Kwon, O.-W., & Lee, J.-H. (2003). Text categorization based on k-nearest neighbor approach for web site classification. Information Processing & Management, 39(1), 25–44.

    Article  Google Scholar 

  • Lachmann, L. M. (1976). From mises to shackle: An essay on Austrian economics and the kaleidic society. Journal of Economic Literature, 14(1), 54–62.

    Google Scholar 

  • Lachmann, L. M. (1977). Capital, expectations, and the market process: Essays on the theory of the market economy. Sheed Andrews and McMeel Inc.

    Google Scholar 

  • Lawrence, P. R., & Lorsch, J. W. (1967). Organization and environment: Managing differentiation and integration. Harvard University.

    Google Scholar 

  • Leonard, D., & Rayport, J. F. (1997). Spark innovation through empathic design. Harvard Business Review, 75, 102–115.

    Google Scholar 

  • Liao, J., & Gartner, W. B. (2006). The effects of pre-venture plan timing and perceived environmental uncertainty on the persistence of emerging firms. Small Business Economics, 27(1), 23–40.

    Article  Google Scholar 

  • Lorenzi, P., Sims, H. P., & Slocum, J. W. (1981). Perceived environmental uncertainty: An individual or environmental attribute? Journal of Management, 7(2), 27–41.

    Article  Google Scholar 

  • Lueg, R., & Borisov, B. G. (2014). Archival or perceived measures of environmental uncertainty? Conceptualization and new empirical evidence. European Management Journal, 32(4), 658–671.

    Article  Google Scholar 

  • Magnani, G., & Zucchella, A. (2018). Uncertainty in entrepreneurship and management studies: A systematic literature review. International Journal of Business and Management, 13(3), 98.

    Article  Google Scholar 

  • March, J. G. (1994). Primer on decision making: How decisions happen. Free Press.

    Google Scholar 

  • March, J. G., & Simon, H. A. (1958). Organizations. Wiley.

    Google Scholar 

  • McBride, R., & Packard, M. D. (2021). On the ontology of action: Actors are not ‘abstractions.’ Academy of Management Review, 46(1), 211–214.

    Article  Google Scholar 

  • McBride, R., & Wuebker, R. (2022). Social objectivity and entrepreneurial opportunities. Academy of Management Review, 47(1), 75–92.

    Article  Google Scholar 

  • McKelvie, A., Haynie, J. M., & Gustavsson, V. (2011). Unpacking the uncertainty construct: Implications for entrepreneurial action. Journal of Business Venturing, 26(3), 273–292.

    Article  Google Scholar 

  • McMullen, J. S., & Shepherd, D. A. (2006). Entrepreneurial action and the role of uncertainty in the theory of the entrepreneur. Academy of Management Review, 31(1), 132–152.

    Article  Google Scholar 

  • Miller, J. I. (2012). The mortality problem of learning and mimetic practice in emerging industries: Dying to be legitimate. Strategic Entrepreneurship Journal, 6(1), 59–88.

    Article  Google Scholar 

  • Miller, D., & Friesen, P. H. (1983). Strategy-making and environment: The third link. Strategic Management Journal, 4(3), 221–235.

    Article  Google Scholar 

  • Milliken, F. J. (1987). Three types of perceived uncertainty about the environment: State, effect, and response uncertainty. Academy of Management Review, 12(1), 133–143.

    Article  Google Scholar 

  • Mises, L. V. (1998). Human action: A treatise on economics. Auburn, AL: Ludwig von Mises Institute.

  • Packard, M. D. (2017). Where did interpretivism go in the theory of entrepreneurship? Journal of Business Venturing, 32(5), 536–549.

    Article  Google Scholar 

  • Packard, M. D. (2018). Why I am not a performativist (yet). Journal of Business Venturing Insights, 9, 39–44.

    Article  Google Scholar 

  • Packard, M. D., & Burnham, T. A. (2021). Do we understand each other? Toward a simulated empathy theory for entrepreneurship. Journal of Business Venturing, 36(1), 106076.

  • Packard, M. D., & Bylund, P. L. (2021). From homo economicus to homo agens: Toward a subjective rationality for entrepreneurship. Journal of Business Venturing, 36(6), 1–15.

    Article  Google Scholar 

  • Packard, M. D., & Clark, B. B. (2020a). Mitigating versus managing epistemic and aleatory uncertainty. Academy of Management Review, 45(4), 872–876.

    Article  Google Scholar 

  • Packard, M. D., & Clark, B. B. (2020b). On the mitigability of uncertainty and the choice between predictive and non-predictive strategy. Academy of Management Review, 45(4), 766–786.

    Article  Google Scholar 

  • Packard, M. D., & Clark, B. B. (2020c). Probability logic fails in immitigable uncertainty, but strategic logic does not. Academy of Management Review, 45(3), 704–707.

    Article  Google Scholar 

  • Packard, M. D., Clark, B. B., & Klein, P. G. (2017). Uncertainty types and transitions in the entrepreneurial process. Organization Science, 28(5), 840–856.

    Article  Google Scholar 

  • Packard, M. D., Bylund, P. L., & Clark, B. B. (2021). Keynes and Knight on uncertainty: Peas in a pod or chalk and cheese? Cambridge Journal of Economics, 45(5), 1099–1125.

    Article  Google Scholar 

  • Parker, S. C. (2009). The economics of entrepreneurship. Cambridge University Press.

  • Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. Harper and Row.

    Google Scholar 

  • Piening, E. P., Thies, F., Wessel, M., & Benlian, A. (2021). Searching for success—entrepreneurs’ responses to crowdfunding failure. Entrepreneurship Theory and Practice, 45(3), 626–657.

  • Ramoglou, S. (2021). Knowable opportunities in an unknowable future? On the epistemological paradoxes of entrepreneurship theory. Journal of Business Venturing, 36(2), 106090.

  • Reinach, A. (1982). On the theory of the negative judgment. In B. Smith (Ed.), Parts and Moments: Studies in Logic and Formal Ontology (pp. 315–378). Philosophia Verlag.

    Chapter  Google Scholar 

  • Rindova, V. P., & Martins, L. L. (2022). Futurescapes: Imagination and temporal reorganization in the design of strategic narratives. Strategic Organization, 20(1), 200–224.

    Article  Google Scholar 

  • Sarasvathy, S. D. (2001). Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review, 26(2), 243–263.

    Article  Google Scholar 

  • Sarasvathy, S. D. (2008). Effectuation: Elements of entrepreneurial expertise. Edward Elgar Publishing.

  • Savage, L. J. (1954). Foundations of statistics. Wiley.

    Google Scholar 

  • Seth, A. K., & Hohwy, J. (2021). Predictive processing as an empirical theory for consciousness science. Cognitive Neuroscience, 12(2), 89–90.

    Article  Google Scholar 

  • Shackle, G. L. S. (1949). Expectation in economics. University Press.

    Google Scholar 

  • Shackle, G. L. S. (1953). The logic of surprise. Economica, 20(78), 112–117.

    Article  Google Scholar 

  • Shackle, G. L. S. (1969). Decision, order, and time in human affairs (2nd ed.). Cambridge University Press.

    Google Scholar 

  • Shackle, G. L. S. (1979). Imagination and the nature of choice. Edinburgh University Press.

    Google Scholar 

  • Sharfman, M. P., & Dean, J. W. (1991). Conceptualizing and measuring the organizational environment: A multidimensional approach. Journal of Management, 17(4), 681–700.

    Article  Google Scholar 

  • Shubik, M. (1954). Information, risk, ignorance, and indeterminacy. The Quarterly Journal of Economics, 68(4), 629–640.

    Article  Google Scholar 

  • Siegenthaler, H. (1997). Learning and its rationality in a context of fundamental uncertainty. Journal of Institutional and Theoretical Economics, 153(4), 748–761.

    Google Scholar 

  • Simons, D. J., & Chabris, C. F. (1999). Gorillas in our midst: Sustained inattentional blindness for dynamic events. Perception, 28(9), 1059–1074.

    Article  Google Scholar 

  • Snyder, N. H., & Glueck, W. F. (1982). Can environmental volatility be measured objectively? Academy of Management Journal, 25(1), 185–192.

    Article  Google Scholar 

  • Spender, J.-C. (1989). Industry recipes. Basil Blackwell.

    Google Scholar 

  • Tan, J. (1996). Regulatory environment and strategic orientations in a transitional economy: A study of Chinese private enterprise. Entrepreneurship Theory and Practice, 21(1), 31–46.

    Article  Google Scholar 

  • Tosi, H., Aldag, R., & Storey, R. (1973). On the measurement of the environment: An assessment of the Lawrence and Lorsch environmental uncertainty subscale. Administrative Science Quarterly, 18(1), 27–36.

  • Townsend, D. M., Hunt, R. A., McMullen, J. S., & Sarasvathy, S. D. (2018). Uncertainty, knowledge problems, and entrepreneurial action. Academy of Management Annals, 12(2), 659–687.

    Article  Google Scholar 

  • Tushman, M. L., & Nadler, D. A. (1978). Information processing as an integrating concept in organizational design. Academy of Management Review, 3(3), 613–624.

    Article  Google Scholar 

  • Warren, R. M. (1970). Perceptual restoration of missing speech sounds. Science, 167(3917), 392–393.

    Article  Google Scholar 

  • Weick, K. E. (1979). The social psychology of organizing. Addison-Wesley.

    Google Scholar 

  • Wood, M., Bakker, R., & Fisher, G. (2021). Back to the future: A time-calibrated theory of entrepreneurial action. Academy of Management Review, 46(1), 147–171.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. West Virginia University, Morgantown, WV, USA

    Ryan W. Angus

  2. University of Nevada, Reno, Reno, NV, USA

    Mark D. Packard

  3. University of Nebraska Omaha, Omaha, NE, USA

    Brent B. Clark

Authors
  1. Ryan W. Angus
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mark D. Packard
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Brent B. Clark
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Mark D. Packard.

Additional information

Publisher's note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Angus, R.W., Packard, M.D. & Clark, B.B. Distinguishing unpredictability from uncertainty in entrepreneurial action theory. Small Bus Econ 60, 1147–1169 (2023). https://doi.org/10.1007/s11187-022-00651-4

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-022-00651-4

Keywords

JEL Classification

Search

Navigation