Author(s): Anh Dinh, Andreas Liening
Rationality in terms of maximizing self-interest is at the core of classical and neoclassical economics. However, researchers have questioned the narrow view of homo oeconomicus. Notably in complex problem-solving situations, human beings depend on cognitive shortcuts and judgmental heuristics, which bound rationality and can lead to irrational and erroneous decisions. Severe and undetected errors can generate crisis and cause irreversible failure. Entrepreneurial failures in terms of business shutdowns are real phenomena in practical entrepreneurship. The entrepreneurial environment is characterized by non-linearity, uncertainty, complexity, and the involvement of intense emotional attachment.
In this environment, entrepreneurs are primarily confronted with complex situations and, therefore, are forced to rely on cognitive shortcuts rather than rationally planned and scripted behaviors. Despite the substantial growing corpus of studies on entrepreneurial bias and failure, fundamental discussion of prevalent notions of rationality has been limited. This paper analyzes the extent of rationality in entrepreneurship and entrepreneurship education, draws on the imperfect entrepreneurial environment. Furthermore, we discuss the learning potential of illogical and erroneous momentums.