The Mediating Role of Risk Perception among Cognitive Biases towards Decision to Start a New Venture
Butt M*, Jamil N and Nawaz R
Mohammad Ali Jinnah University, Islamabad, Pakistan
- Corresponding Author :
- Butt M
Mohammad Ali Jinnah University
E-mail: [email protected]
Received Date: June 12, 2014; Accepted Date: July 17, 2015; Published Date: July 29, 2015
Citation: Butt M, Jamil N, Nawaz R (2015) The Mediating Role of Risk Perception among Cognitive Biases towards Decision to Start a New Venture. Arabian J Bus Manag Review 5:154.
Copyright: © 2015 Butt M, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
The Objective of the study is to investigate the relationship of overconfidence bias and illusion of control bias towards the start of new venture, with the mediating role of risk perception in context of Pakistan. To understand the relationship, this study developed and tested hypothesis by correlation and regression analysis. This study’s sample consisted of 170 students pursuing a Masters of Business Administration. The students’ responses to a survey based on a case study regarding a decision to start a venture were examined. This study found illusion of control and risk perceptions have significant effect on decision to start new venture. Conversely, overconfidence bias has insignificant relationship with decision to start new venture. The positive and negative impact of biases and perceiving low levels of risk suggest the importance of exploring the area of venture formation. As this study has incorporated two biases but many other biases should also be considered that effect human decision making process like self-efficacy, availability heuristics, law of small numbers and escalation of commitment.