Abstract
This paper examines how heuristics can be used for entrepreneurial decision-making under uncertainty, specifically by incorporating them as decision-making strategies that guide boundaries within real options theory. The study begins by establishing an overview of two mainstream approaches offering conflicting accounts on heuristics, with regard to when and how they should be used for decision-making. It is revealed that these differences are largely a result of conflicting perspectives on rationality, stemming from paradigms that are often viewed as rivals. The study posits that these paradigms need not exist as rivals, and that it is possible to establish a broader, more productive view of rationality. By recognizing both the liabilities and strengths of heuristics, it is argued that utilizing heuristics as a deliberate strategy can be a rational way of proceeding under particularly dynamic and uncertain conditions – especially ones in which it is not possible to model concrete, limited pathways with probability judgements. Furthermore, the study proposes that incorporating the use of ecologically rational heuristics to create rigid rules for real options decisions at the time of investment can be an effective way of overcoming a number of current issues with real options theory. Ultimately, it is argued that utilizing learned heuristics as part of a real options framework allows for a logical and structured approach towards entrepreneurial decision-making under (radical) uncertainty.
Educations | MSc in Finance and Strategic Management, (Graduate Programme) Final Thesis |
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Language | English |
Publication date | 2023 |
Number of pages | 57 |
Supervisors | Wolfgang Sofka |