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What is This?
We review conjoint analysis (CA) usage in recent entrepreneurship research to assess how
researchers have used the method to study entrepreneurial decision making. We first provide
a brief overview of the method and present an exemplar study. We next examine how 16
studies published in leading entrepreneurship journals from 1999 to 2008 used CA, highlight
topics these studies have investigated most frequently, and suggest reasons why studies, in
general, have not used the method with greater frequency, despite its many advantages in
studying decision making. We conclude by suggesting potential future research applications
in an attempt to encourage greater CA usage in entrepreneurship research.
C entral research questions in entrepreneurship include how and why some individuals
(or teams) identify opportunities, evaluate them as viable, and then decide to exploit
them, whereas others do not, and, in turn, how opportunities result in wealth creation (Brush
et al., 2003; Shane & Venkataraman, 2000). Thus, both judgment and decision making rep-
resent critical components within the entrepreneurship process (Baron, 2006).
To examine these components, studies have frequently used surveys or interviews to
investigate why entrepreneurs decide to form and resource providers choose to invest in
new ventures. Although these methods have advanced the field, they often involve post hoc
data collection requiring respondents to remember and articulate past decisions, which may
result in recall bias and revisionism (Golden, 1992). Thus, other methods that overcome
these potential limitations are needed to study these critical issues (Busenitz et al., 2003).
Conjoint analysis (CA) represents one such method. Given its ability to partition decision-
making processes into underlying respondent preferences for specific stimuli (e.g., product or
idea attributes), studies in various disciplines, particularly marketing, have often used CA
since Luce and Tukey (1964) first proposed it. Researchers have also long acknowledged the
potential value CA has for entrepreneurship research (DeSarbo, MacMillan, & Day, 1987).
For example, Shepherd and Zacharakis (1997, 1999) reviewed extant research, provided a
useful tutorial, and suggested topics where researchers could effectively use CA.
Authors’ Note: We would like to thank the Guest Associate Editors and two anonymous reviewers for their
valuable comments on this study. Please address correspondence to Franz T. Lohrke, Brock School of Business,
Samford University, 800 Lakeshore Drive, Birmingham, AL 35229; e-mail: ftlohrke@samford.edu.
16
Despite both the long-standing recognition of its usefulness and valuable guidance in its
application, in the decade since the articles by Shepherd and Zacharakis were published,
entrepreneurship studies have rarely used CA. Indeed, Dean, Shook, and Payne (2007)
found studies had only used it to test 2% of hypotheses from 1976 through 2004 in two
leading entrepreneurship journals. Although this dearth in usage may result, in part, from
some studies examining topics not amenable to CA, decision making’s centrality in the field
suggests that opportunities exist for greater CA usage.
Accordingly, we review CA usage in entrepreneurship research published since
Shepherd and Zacharakis’ (1997, 1999) articles. First, we provide a brief overview of
CA. We then present an exemplar study to illustrate how it can aid in studying an issue
(i.e., risk taking) central to entrepreneurship research. We next examine how studies pub-
lished in leading entrepreneurship journals from 1999 to 2008 have used CA, highlight
topics examined, and suggest reasons why the method has not been used more frequently.
We conclude by suggesting potential future research applications for CA when studying
entrepreneurial decision making.
‘‘After reading Firm #1’s business plan, please answer the following:’’
Far below average Far above average
Researchers could then use these ratings as independent variables to predict each
attribute’s overall importance in investment decisions. For example, in a seminal study,
Tyebjee and Bruno (1984) asked venture capitalists (VCs) to consider a current investment
opportunity and rate its expected return, failure risk, industry, company, and management
attributes. Using regression analysis, they found market attractiveness (e.g., growth rate)
and product differentiation (e.g., uniqueness) were significantly related to expected return,
whereas managerial capabilities (e.g., finance skills) and environmental threat resistance
(e.g., high entry barriers) were significantly related to failure risk.
In contrast, a study using a decompositional, CA method might present the following:
Researchers could present descriptions individually and ask respondents to indicate the
probability they would invest, have them select the one they are more likely to invest in
from paired comparisons, or ask them to rank all ventures from most or least likely for
investment. With CA, respondents only provide the dependent variable (e.g., investment
probability or firm ranking) because independent variables are fixed at known levels.
Researchers could then estimate attribute importance using one of several multivariate sta-
tistical methods (e.g., ordinary least squares [OLS] or logit regression), depending on fac-
tors such as whether the dependent variable is continuous or binary. For example, Shepherd
(1999) presented VCs with new venture descriptions and asked them to rate survival prob-
ability based on each one’s industry, company, and management attributes. Using regres-
sion analysis, he found that management attributes (e.g., industry experience) were the
most important ones related to VCs’ survival probability ratings.
Although CA studies often use the same statistical methods (e.g., regression analysis) as
those using compositional methods, CA offers several relative benefits when studying
decision-making issues. Most importantly, it is specifically designed to assess respondents’
‘‘theory in use’’ by capturing respondents’ preferences as they make decisions. In contrast,
studies using compositional research designs have often used retrospective accounts to study
critical decision-making issues. For example, although Tyebjee and Bruno (1984) asked
VCs to assess a current investment opportunity, other studies have often asked VCs to recall
investment decisions and rank criteria they used in making those decisions. Although retro-
spective accounts are often necessary in organizational research, they may produce biased
results if respondents are unwilling or unable to recall their decision processes.
CA is also unique in that it can be used to examine preferences at the individual and/or
group (‘‘aggregate’’) level. In addition, whereas many multivariate methods require all
independent variables to have the same (e.g., linear) relationship with the dependent vari-
able, CA allows each to have a different (e.g., linear, quadratic, or stepwise) one, making it
extremely flexible when investigating complex decision-making issues (Hair et al., 2006).
Given these advantages, extant entrepreneurship research has used CA to examine some
key issues, but, historically, studies have examined a narrow range of topics. For example,
Shepherd and Zacharakis (1997) found, with limited exception (e.g., DeSarbo et al., 1987),
studies used CA primarily to investigate VC decisions. They (1999) also reviewed VC
studies and concluded that VCs often used different decision criteria when completing a
CA task than when asked about their decisions post hoc via surveys, which the authors
noted provided additional evidence of CA’s advantages in studying entrepreneurial decision
making.
With its increasing use across disciplines, recent tutorials have examined critical
research design issues related to CA. To highlight some of these issues prior to reviewing
CA usage in entrepreneurship research, we briefly review an exemplar study.2
An Exemplar Study
McMullen and Shepherd (2006) used CA to examine factors affecting whether untenured
assistant professors would take risks inherent in attempting to publish consensus-
challenging research. We chose their study for three reasons. First, although they did not
directly study the entrepreneurship process, they examined a concept (i.e., risk taking) cen-
tral to it. Second, they used some of the most current CA methods to test their hypotheses.
Third, their research questions should interest many readers, thus making the example more
salient.
McMullen and Shepherd used self-efficacy theory (Bandura, 1977) to develop their
hypotheses, which states that people decide to complete a task based both on whether they
perceive they have the ability (i.e., ‘‘efficacy’’) to successfully finish it and they will obtain
an outcome they desire. Thus, the authors posited that when presented with scenarios
having high anticipated rewards (punishments) and low (high) time pressure, professors
would choose the higher (lower) risk research path, especially when told they had high
(low) research skills.
To test these hypotheses, they developed scenarios using various combinations of attri-
butes (e.g., rewards and time pressure) and levels (e.g., high and low). For example, they
operationalized high (low) time pressure as ‘‘You have two (five) years before your review
for tenure.’’ Because self-efficacy theory posits that efficacy and expected outcomes inter-
act, the authors also designed scenarios to test these interactions. They then pretested these
and used an 11-point Likert scale anchored with ‘‘incremental’’ and ‘‘radical research’’
choices having a 90% and unknown success probability, respectively, as the dependent vari-
able. To control potential autocorrelation and heteroskedasticity in responses, they used
hierarchical linear modeling. In general, results supported their hypotheses.
Table 1
Conjoint Analysis Usage in Entrepreneurship Research, 1999–2008
Data Data
Authors Sample Topic Collection Analysis Validation
(continued)
Table 1. (continued)
Data Data
Authors Sample Topic Collection Analysis Validation
2002). For example, most used regression to analyze data, with an increasing number using
hierarchical linear modeling to control for autocorrelation that may result from using mul-
tiple ratings from the same rater. All studies also used one or more internal validation
methods.
In contrast, none assessed external validity by using their resulting models to predict out-
comes with another sample. In addition, most examined linear relationships, despite both
CA’s ability to examine other (e.g., quadratic) relationships and the frequent supposition
that these more complex relationships can exist in some entrepreneurial phenomenon
(e.g., perceived risk and subsequent action).
Although these results show that CA usage has increased, 16 studies in 10 years from 25
journals still represent a fairly low usage rate. Given both the recurring recommendations
for greater CA usage and the field’s permeable boundaries with related disciplines (e.g.,
marketing) that frequently use this method, our findings remain somewhat surprising. Sev-
eral factors related to CA’s limitations and entrepreneurship scholar training may help
explain this dearth in usage.
In addition, CA may have limited applicability when assessing preferences for futuristic
scenarios because high respondent uncertainty makes accurate responses difficult.
Although recent research (e.g., Hoeffler, 2003) has proposed techniques for improving
measurement in these contexts, a strong need remains to improve CA reliability when using
scenarios based on novel situations that comprise many entrepreneurship research
questions.
Future Directions
We can generally conclude from our literature review that extant studies have underused
CA to examine entrepreneurial decision making, especially given the method’s direct
applicability to many of the field’s most important research questions. To provide guidance
in applying CA to study these questions, we examine several future research avenues.
Shepherd and Zacharakis (1997) recommended several topics where entrepreneurship
studies could fruitfully use CA by drawing from economics (e.g., decision-making ration-
ality), social psychology (e.g., decision anchoring under uncertainty), marketing (e.g., lia-
bility of newness), and extant entrepreneurship research (e.g., strategic decision making).
Subsequently, other researchers have recommended other topics, including corporate ven-
turing (Shepherd & Krueger, 2002) and entrepreneurial intuition (Mitchell, Friga, & Mitch-
ell, 2005). As noted, extant CA studies have examined some (e.g., liability of newness) but
not all of these topics, indicating that several important research opportunities still exist.
Building on these suggestions, we highlight several other areas where researchers could
use CA to study entrepreneurial decision making. In general, CA could potentially revive
research studying individual-level phenomenon, an area that has been somewhat deempha-
sized following widespread disillusionment with the ‘‘trait’’ approach (Gartner, 1990).
Because entrepreneurship occurs at the individual-opportunity nexus (Shane & Venkatara-
man, 2000), however, deemphasizing the former is not a viable option. One issue with pre-
vious (especially trait-based) studies is they often proxied decision making with
demographic (e.g., age) or attitudinal (e.g., need for achievement) attributes, resulting in
a decision making ‘‘black box’’ (Mitchell et al., 2005). With its advantages in examining
respondents’ ‘‘theory in use,’’ however, CA may help open this box by providing insight
into entrepreneurial decision making. Thus, we next examine some of these possible topics
within the entrepreneurship process.3
Opportunity Identification
To form and grow a new venture, entrepreneurs must first identify potential opportuni-
ties. These can arise from different sources, including exogenous shocks to an economy or
asymmetric information possessed by different individuals (Eckhardt & Shane, 2003), but
several factors may influence the likelihood that an individual will recognize an opportu-
nity: a person’s access to information from different life experiences (e.g., employment),
social network involvement, personality traits (e.g., creativity), and cognitive ability to
‘‘connect the dots’’ among diverse trends (Ardichvili, Cardozo, & Ray, 2003; Baron, 2006).
Although some agreement exists about factors that may affect opportunity identification,
considerable debate continues about the cognitive processes that entrepreneurs use to iden-
tify them (Shook, Priem, & McGee, 2003). One view suggests that potential entrepreneurs
intend to start new ventures, and, thus, they systematically scan environmental trends for
opportunities. Another suggests that individuals having higher ‘‘entrepreneurial alertness’’
can discover opportunities, sometimes without actively searching for them (Kirzner, 1997).
One possible resolution to this debate may reside in the nature of the opportunity exam-
ined (e.g., how codified vs. tacit it is, see Smith, Matthews, & Schenkel, 2009). Different
entrepreneurs, however, may also use different decision-making processes, and it is in this
latter area where researchers might successfully use CA to study opportunity identification.
For example, to examine the deliberate approach, future research could examine how nas-
cent entrepreneurs respond to changing industry conditions (see Oppewal, Louviere, &
Timmermans, 2000). In addition, research could use CA to examine whether differences
in respondents’ entrepreneurial alertness levels lead to different decisions related to oppor-
tunity identification. Gaglio and Katz (2001) suggested that mixed results across entrepre-
neurship alertness studies, to date, may arise from frequent reliance on post hoc data
collection. Thus, using CA to examine issues relevant to this debate appears to be a critical
future research avenue.
Along with this general debate, other factors potentially affecting opportunity identifica-
tion related to knowledge, personality, or pattern recognition could be examined with CA.
For example, Baron and Ensley (2006) studied whether nascent and experienced entrepre-
neurs possessed different mental ‘‘prototypes’’ for new ventures that affected their
opportunity-recognition abilities. They content-analyzed retrospective accounts and found
that these groups varied in both the number and type of attributes that they used in decisions.
Thus, future research could use CA to triangulate and build on these results by assessing
how these different groups make trade offs among different criteria when identifying
opportunities.
Opportunity Evaluation
After identifying an opportunity, entrepreneurs must forecast, often under conditions of
high environmental uncertainty, the opportunity’s expected value based on both the poten-
tial costs and benefits of exploiting it (Keh, Foo, & Lim, 2002). Key potential stakeholders
must conduct similar calculations when deciding whether to become involved with the new
venture. Costs may include actual expenditures or opportunity costs from foregoing other
options, and benefits may include financial or psychological gains (Shane & Venkataraman,
2000).
Research has examined how myriad characteristics, including background (e.g., work
experience), attitudinal factors (e.g., self-efficacy), psychological attributes (e.g., risk-
taking propensity), and cognitive processes (e.g., biases), affect opportunity evaluation
(e.g., Markman, Balkin, & Baron, 2002; Ucbasaran, Westhead, & Wright, 2008). One
long-standing issue, however, involves whether entrepreneurs are willing to pursue higher
risk opportunities than nonentrepreneurs (Simon, Houghton, & Aquino, 2000). Given that
starting new ventures, in general, requires entrepreneurs to take several (e.g., financial and
reputational) risks, the widely shared view that they have higher risk taking propensities or
risk tolerances than nonentrepreneurs remains intuitively appealing (Norton & Moore,
2006). Empirical results, to date, however, have been decidedly mixed. One explanation
may be that entrepreneurs categorize risks differently than nonentrepreneurs, and, as a
result, they may not perceive themselves as taking abnormally high risks when asked to
self-assess their actions (Palich & Bagby, 1995). In addition, Janney and Dess (2006) sug-
gest that some risk measures may have limited applicability when studying entrepreneurs
because their primary concerns (e.g., ownership dilution from issuing equity), and, in turn,
risk perceptions differ from managers in established firms.
A second major research area involves how entrepreneurs use biases or heuristics when
evaluating opportunities. For example, research suggests that entrepreneurs may have a
higher propensity to use some biases (e.g., escalation of commitment) than nonentrepre-
neurs when evaluating opportunities (Baron, 1998). In addition, entrepreneurs and stake-
holders (e.g., VCs) may rely on heuristics or ‘‘mental shortcut’’ when evaluating
opportunities (Busenitz & Barney, 1997). Although using these heuristics can expedite
opportunity evaluation, which may provide a critical advantage in pursuing the opportunity,
they can also systematically bias the decision-making process.
To date, researchers have frequently used CA to examine VCs’ and, to a lesser extent,
entrepreneurs’ (e.g., Choi & Shepherd, 2004) criteria for evaluating opportunities. Some
have also examined how specific biases can affect these assessments (e.g. DeTienne
et al., 2008). Future studies, however, could use CA to study issues related to risk taking
and other decision-making biases. For example, one useful distinction that may help resolve
issues about whether entrepreneurs tolerate risk better than nonentrepreneurs involves
dividing risk into perceptions, which may be influenced by how a problem is framed
(e.g., potential gain or loss), and propensity, which is the tendency to take or avoid risk
based on previous (e.g., positive or negative risk-taking) experiences (Sitkin & Weingart,
1995). Thus, researchers could use well-established theories (e.g., prospect theory, Kahne-
man & Tversky, 1979) and constructs (e.g., entrepreneurial experience, Ucbasaran et al.,
2008) to design a CA study examining risk taking.
Beyond its ability to reveal preferences, factors related to how respondents complete a
CA task (e.g., speed) may also provide insights into opportunity evaluation. For example,
although rapid task completion could evidence lack of effort, it can also indicate that
respondents used heuristics rather than more rational decision-making criteria (Hair
et al., 2006). In addition, Franke, Gruber, Harhoff, and Henkel (2008) noted that CA also
can be used to assess whether respondents use compensatory (e.g., a venture weakness can
be counterbalanced by a strength) versus noncompensatory (e.g., a weakness serves as a
‘‘knock-out’’ criterion) decision making in evaluating opportunities. Thus, CA could be
used to study both how entrepreneurs cope with resources not under their direct control and
which resource deficiencies can derail the opportunity evaluation process. In addition, it
could be used to examine how entrepreneurs trade off important future performance
outcomes when engaging in the cost/benefit calculus of opportunity evaluation. For
example, building on social-cause marketing studies (Bloom, Hoeffler, Keller, & Meza,
2006), researchers could examine how entrepreneurs trade off potential ‘‘double’’ or
‘‘triple’’ bottom-line outcomes in socially entrepreneurial firms (Austin, Stevenson, &
Wei-Skillern, 2006).
Opportunity Exploitation
After evaluating whether opportunities are viable, entrepreneurs must then decide how
best to exploit them. One fundamental choice involves whether to pursue or sell the oppor-
tunity. The field has primarily focused on the former, which raises a second important ques-
tion related to how entrepreneurs assemble resources necessary to exploit opportunities
(Shane, 2003).
In examining these issues, research has focused on factors that lead to new venture cre-
ation as well as the different organizational forms these new ventures can use (Brush et al.,
2003). Many key issues related to opportunity exploitation involve gaining access to critical
resources. Entrepreneurs, however, often face significant hurdles because potential stake-
holders may be reluctant to conduct business with a new venture lacking an established
track record. These ‘‘liabilities of newness’’ issues can result in firm failure, so finding ways
to overcome them represents a critical opportunity exploitation issue (Stinchcombe, 1965).
To date, however, most research has focused on external liability of newness issues (e.g.,
stakeholder perceptions). Thus, future research could use CA to examine several internal
liability issues noted by Stinchcombe (1965), including the need to develop organizational
routines and establish trust among managers. Trust, in particular, represents a fundamental
issue for entrepreneurship research, in general (Venkataraman, 1997), and organizational
research has identified several different forms that can exist (e.g., Rousseau, Sitkin, Burt,
& Camerer, 1998). In addition, research has recently used CA to study trust (e.g., Schoder
& Haenlein, 2004), which future entrepreneurship studies could build on to examine impor-
tant issues within the field.
Conclusion
Notes
1. Given the large number of recent, excellent tutorials covering conjoint analysis, we do not focus specif-
ically on the mechanics of the method, instead referring interested readers to several useful sources (e.g.,
Aiman-Smith et al., 2002; Hair et al., 2006; Karren & Barringer, 2002).
2. We thank an anonymous reviewer for suggesting this approach.
3. Although, arguably, many of these topics can span decision making across multiple steps in the process,
we discuss each within the primary step within which it has been investigated, to date, in entrepreneurship
research.
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Franz T. Lohrke (ftlohrke@samford.edu) is the Brock Family Chair of Entrepreneurship and Chair of the
Entrepreneurship, Management, and Marketing Department in the Brock School of Business at Samford Uni-
versity. His research focuses on liabilities of newness, strategic alliances, organizational slack, and organiza-
tional turnaround and has appeared in Entrepreneurship Theory & Practice, International Small Business
Journal, Journal of Business Research, and Journal of International Management. He is also currently co-edit-
ing two books about entrepreneurship research.
Betsy Bugg Holloway serves as the Dwight Moody Beeson Chair of Business and an associate professor of
marketing in the Brock School of Business at Samford University. Her research focuses on services marketing,
service failure and recovery, and online retailing, and has appeared in such journals as Journal of Service
Research, Journal of Business Research, and Journal of Personal Selling and Sales Management.
Thomas W. Woolley is Chair of the Economics, Finance, and Quantitative Analysis Department and a profes-
sor of statistics in the Brock School of Business at Samford University. His research has included the areas of
outlier methodology and power analytic evaluation of research and has appeared in such outlets as Cancer
Research, American Journal of Public Health, Teaching Statistics, and Social Science Quarterly.