An Action Theory of Entrepreneurship
Michael Frese
Justus Liebig Univ. Giessen,
Interdisciplinary Research Unit for EvidenceBased Management and Entrepreneurship
and London Business School
Outline
• Action theory introduction
• Applications:
• Active planning
• Learning from errors
• Training
Goal of Action Theory
• Action as the core of entrepreneurship
• Integration
• Sophisticated theory that explains entrepreneurial
actions and, thereby success
The Giessen Amsterdam Model of
Entrepreneurial Success (Revised)
A Person
-Traits
-Orientations
-Cognitive ability
M4
M1 M2
C
Goals
A
B
Human Capital
-Experience
-Expertise
-Learning
-Knowledge
-Skills
Success
D
Action
M3
E
Environment
National Culture
Dimensions of Action Theory
•Action sequence: Goals, Information search
(orientation), plans, monitoring, feedback
•Action structure: Level of regulation from
conscious (idea level) to automatic (physical)
• Action oriented mental model
The Action Sequence
Goal
Feedback
Information
search
Monitoring
of execution
Planning
Frese, M., & Zapf, D. (1994). Action as the core of work psychology: A German approach. In H. C. Triandis,
M. D. Dunnette, & L. M. Hough (Eds.), Handbook of industrial and organizational psychology (2 ed., Vol. 4,
pp. 271-340). Palo Alto, CA: Consulting Psychologists Press
Action sequence
Goal development
(Decision)
Goal development
Plan decision)
Carrying out
Processing feedback
Frese, M., & Zapf, D. (1994). Action as the core of work psychology: A German approach.
In H. C. Triandis, M. D. Dunnette, & L. M. Hough (Eds.), Handbook of industrial and
organizational psychology (2 ed., Vol. 4, pp. 271-340). Palo Alto, CA: Consulting
Psychologists Press
Goals
• Goals as anticipated results – motivator of action
• The better visualized, the more motivation
• The less worrying and the less fantasizing about
the goal, the better
• The more thinking about discrepancy between
fantasy and reality, the better
• Difference between wish and goal (regulatory
function)
• Difficulty (Locke & Latham)
The Action Sequence
Goal
Feedback
Information
search
Monitoring
of execution
Planning
Frese, M., & Zapf, D. (1994). Action as the core of work psychology: A German approach. In H. C. Triandis,
M. D. Dunnette, & L. M. Hough (Eds.), Handbook of industrial and organizational psychology (2 ed., Vol. 4,
pp. 271-340). Palo Alto, CA: Consulting Psychologists Press
Information Search, Model, Prognosis,
and Signals
•Level of decomposition
•Active diagnostic information seeking
• Model of the environment
• The more signals in a model, the better
Plans
•Detailedness (= specificity of goals in goal setting
theory, cf. Locke & Latham)
• Plan: Bridge between thought and action
• Plan producing implementation intention
(Gollwitzer & Heckhausen)
• Costs of pre-planning
• The difficulty of disengagement, once a plan is
put into effect
Plans
•Detailedness and proactiveness
• Detailedness: Means I think of many aspects of
what I need to do, including back-up plans
• Proactiveness: I think of long-term issues and
prepare myself for future opportunities and
problems (anticipation range)
Why Are People Active?
•An ontological given (orientation reflex, curiosity,
mastery motive)
•Goal directed behavior is active because it
produces new environments (goal refers to
something that does not yet exist)
•Active approach leads to:
•better learning
•better handling of errors
•to an action oriented mental model
•better knowledge of the situation (exploration)
•better survival (including sexual procreation
and through active work)
Why Are People Active -2-
•Active approach in learning: deliberate practice –
boundary lines of your skills
•New goal development reduces monotony and
allows new use of conscious level of regulation
Informal Planning of Business Owners
- Business owners work in an unstructured
situation  planning more necessary than
for employees
- Recently scepticism towards planning; rather
intuition, experimentation, improvisation
- Argument: planning takes too long and produces
a certain amount of rigidity, environment too
erratic (formal planning?)
- Counterargument: Not necessarily contradiction:
intuition depends on stored, routinized plans
(expertise research); explicit conscious
planning may help in experimentation
Positive Functions of Informal Planning
• Translates goals into actions and to mobilize extra effort
(Gollwitzer, 1996),
• Amplifies persistence and decreases distraction
(Diefendorff & Lord, 2004),
• Helps to stay on track and ensures that the goal is not
lost or forgotten (Locke & Latham, 1990)
• Leads to focus on priorities (Tripoli, 1998),
• Reduces load during actions because actions are planned
beforehand (actions run more smoothly),
• Motivates owners to deal with problems,
• Prepares owners to have Plan B if something goes wrong
Positive Functions of Proactive Planning
• Prepares for future opportunities and problems now
• Leads to earlier presence in important markets
• Makes better use of scarce resources
• Changes and influences the environment
• Leads to original and often unusual solutions – not
copies of others
• Helps a person to receive more and better feedback than
when using a reactive or passive approach (Ashford
& Tsui, 1991).
Antecedents of Elaborate and Active Planning:
Cognitive ability and Skills/Knowledge
• Working memory,
• Acquisition of knowledge and skills,
• Speeds up decision making (Ackerman & Humphreys,
1990),
• Makes complex planning possible (elaborate and active
conscious planning) (Kanfer & Ackerman, 1989).
• Makes it possible to think of more relevant issues and
about the relationships between these issues.
• Qualification increases skills: ready-made routinized
responses available (Frese & Zapf, 1994)
• Qualifications reduce processing capacity (Kahneman,
1973).
• Frees up cognitive resources which are available to
develop elaborate and active plans to achieve goals.
Antecedents of Elaborate and Active Planning:
Motivational Resources
• Feasibility (internal locus of control, self-efficacy) and
desirability (achievement motivation and proactive
personality)
• Outcome and competency expectancies make it useful to
plan well, e.g. an internal locus of control leads to
more elaborate and active planning because it
makes sense to be active and to plan one’s actions
(Skinner, 1997), and leads to higher entrepreneurial
performance because entrepreneurship requires to
be self-motivated and not to wait for others to tell
what to do
• Self-efficacy - belief to competently perform actions makes it useful to develop elaborate and active
plans which contributes to high performance.
Antecedents of Elaborate and Active Planning:
Motivational Resources – 2 –
• Achievement motivation implies to want to have an
impact and not to give up easily (McClelland &
Winter, 1971); therefore, more develop active plans
and guards from switching tasks.
• Proactive Personality (subjective personal initiative)
makes active and elaborate planning desirable
Measure of Elaborate and Proactive Planning
• In-depth structured interview (max 40 min)
• First, rank order common business goals (e.g., increasing profits
used as stimulus material)
• Second, describe the two most important goal areas in detail to
understand subgoals (e.g., buying a machine to expand
production) – these subgoals loosely related to the stimulus
material on cards
• Third, asking owners to describe how they want to go about
achieving their goals (2 goals)
• Fourth, prompts, for example, What do you mean by ....? Can you
give me an example? What have you done so far to reach…?
• Measures: substeps and number of issues thought about and how
much thinking about future opportunities and threats and
preparing for them now (high inter-rater reliability and
Alphas)
Elaborate & proactive planning:
Theoretical mediational model
Motivat.
resources
Elab/proact
planning
Cognitive
resources
Success
Elaborate & proactive planning as mediator:
Results from Namibia, South Africa, and Zimbabwe
Motivat.
resources
.00
.19
Elab/proact .54 *
planning
Size
.38 *
Cognitive
resources
.37 *
Frese, M., Krauss, S., Keith, N., Escher, S.,
Grabarkiewicz, R., Unger, J., et al. (2006).
Business Owners' Action Planning and Its
Relationship to Business Success in Three African
Countries. Giessen: Dept. of Psychology, submitted.
Reactive Strategy in South Africa
% of highly successful
owners
50
39%
40
30
20
10
6%
0
High
Low
Reactive strategy
Strategies and Entrepreneurial Success – Longitudinal
Study – Betas after Controlling for Prior Success (Zimbabwe)
Beneficial Cycle
Time
Planning
.26*
Success
Vicious Cycle
-.22§
NonReactive
Success
.41*
Planning
Krauss, Frese, in prep.
Success
-.19*
Reactive
NonSuccess
The Action Sequence
Goal
Feedback
Information
search
Monitoring
of execution
Planning
Frese, M., & Zapf, D. (1994). Action as the core of work psychology: A German approach. In H. C. Triandis,
M. D. Dunnette, & L. M. Hough (Eds.), Handbook of industrial and organizational psychology (2 ed., Vol. 4,
pp. 271-340). Palo Alto, CA: Consulting Psychologists Press
Execution – Monitoring
•Speed, Accuracy
•Working memory and limitations
Feedback Processing
• Feedback: difference between goal and
current state
• Feedback: Learning
• Feedback not always positive? (feedback
intervention and feedback that triggers selfrelated thoughts, Kluger & DeNisi)
Feedback Processing: The Function of
Errors
• Error management training
• Errors and Performance
• Error management culture
Competence 5-point-training)
difficult task
2,6
2,4
2,2
2
1,8
1,6
1,4
1,2
1
error management
training
error avoidance training
Frese, M., Brodbeck, F., Heinbokel, T., Mooser, C., Schleiffenbaum, E., & Thiemann, P.
(1991). Errors in training computer skills: On the positive function of errors. HumanComputer Interaction, 6, 77-93.
Keith, N., & Frese, M. (2005). Self-regulation in error management training: Emotion control and
metacognition as mediators of performance effects. Journal of Applied Psychology, 90, 677-691.
Error Management Training (EMT) and
Mediation by Metacognition & Emotion Control
Training condition
.40**
Error-avoidant
vs. Error manag.
training
.60**
Mediators
Emotion control
Path fixed to zero
Metacognitive
activity
Outcome
.30*
Transfer
performance
.34**
Keith, N., & Frese, M. (2005). Self-regulation in error management training: Emotion control and
metacognition as mediators of performance effects. Journal of Applied Psychology, 90, 677-691.
Error Management Training (EMT) and
Mediation by Metacognition & Emotion Control
Training condition
.40**
Error-avoidant
vs. Error manag.
training
.60**
Mediators
Emotion control
Path fixed to zero
Metacognitive
activity
Outcome
.30*
Transfer
performance
.34**
Error Management Instructions (Heuristics)
•I have made an error: Great
•There is always a way out of any error
situation
•The more errors you make, the more you
learn
•Errors are a natural part of the learning
process! They inform you what you are
still able to learn
Error Management and Stress Management
•Errors lead to added tasks (worry, dealing
with problem of error)
•Error management training leads to
reduced stress when errors appear
•Therefore, easier solution and problem
solving and more learning possible
Transfer Performance in Difficult Tasks
One Week After Training
Transfer
Performance
4
3,48
3
2
1,62
1
0
1
2
Error Management
Error avoidance
Training with instructions
training
Heimbeck, Frese, Sonnentag & Keith, 2003
3
Transfer Performance in Difficult Tasks
One Week After Training
Transfer
Performance
4
3,48
3
2,1
2
1,62
1
0
1
2
Error Management
Error avoidance
Training with instructions
training
3
Error Training
without instructions
Heimbeck, D., Frese, M., Sonnentag, S., & Keith, N. (2003). Integrating errors into the
training process: The function of error management instructions and the role of goal
orientation. Personnel Psychology, 56, 333-362.
Results of Meta-Analysis: Moderator
analysis of clarity of feedback
Mean effect size & 95% CI by moderator Clarity
of task feedback
1
0
d=.57
d=.19
-1
Low clarity (k=7, n=1005)
High clarity (k=16, n=976)
Keith, N., & Frese, M. (2008). Performance Effects of Error Management Training: A
Meta-Analysis. Journal of Applied Psychology, 93, 59-69.
Results of Meta-Analysis: Moderator analysis
of near (analogical transfer) vs. far transfer
task (adaptive transfer)
Mean effect size & 95% CI by moderator
Adaptivity of transfer task
1
0
0.80**
0.17
-1
Analogical transfer (k=12,
N=1445)
Adaptive transfer (k=11,
N=536)
Keith, N., & Frese, M. (2008). Performance Effects of Error Management Training: A
Meta-Analysis. Journal of Applied Psychology, 93, 59-69.
Correlations of Owners’ Error Orientation with
Firm Performance (Small Scale Start-ups
Owners in Germany, N= 196)
Individual variables:
Firm’s performance
Error strain (EOQ)
-.27**
Learning from errors (EOQ)
.12*
Error competence (EOQ)
.26**
Action orientation after
failure (Kuhl)
.30**
* p < .05, ** p < .01
(Goebel, 1998, based on EOQ – Error Orientation Questionnaire)
Company Level: Error Management
Culture – Examples of Items
•
•
•
•
For us, errors are very useful for
improving the work process.
After an error has occurred, it is analyzed
thoroughly.
When mastering a task, people can learn a
lot from their mistakes.
When an error has occurred, we usually
know how to deal with it.
Action
Error Prevention
Error
Error consequences
Error Management
Cultural factors:
- quick error discovery
- quick recovery
- help in discovery/recovery
- organizational routines
- open communication about
errors
- emphasis on learning
Very High Return on Assets ear later
30%
25%
25%
20%
15%
10%
6.25%
5%
0%
Highes t Third EMC
Lowes t Third EMC
Error Management Culture (EMC)
Result on Error Management
Culture and Profitability
About 20% of profitability is determined by error
management culture
(van Dyck, C., Frese, M., Baer, M., & Sonnentag, S. (2005).
Organizational error management culture and its impact on
performance: A two-study replication. Journal of Applied
Psychology, 90, 1228-1240.)
The Use of Action Sequence in the
Discussion of Entrepreneurship:
Uncertainty and on which Action Step
is the Emphasis
McCullen, J. S., & Shephard, D. A. (in press). Entrepreneurial action
and the role of uncertainty in the theory of the entrepreneur. Academy
of Management Review.
Sarasvathy, S. D. (2001). Causation and effectuation: Toward a
theoretical shift from economic inevitability to entrepreneurial
contingency. Academy of Management Review, 26, 243-263.
The Action Sequence: For Example Uncertainty
Goal
Feedback
Information
search
Monitoring
of execution
Planning
The Action Sequence: For Example Use of Action
Step for Entrepreneurial
Goal
Locke,
Advance
Feedback
Market, customer
orientation
Latham
Goal
directed
action
Information
search
Daft
Monitoring
of execution
Planning
Sarsvathy
Dimensions of Action Theory
•Action sequence: Goals, Information search
(orientation), plans, monitoring, feedback
•Action structure: Level of regulation from
conscious (idea level) to automatic (physical)
• Action oriented mental model
Action Structure: Action Regulation
(cf. Anderson, Hacker, Rasmussen, Schneider &
Shiffrin)
Conscious and
automatic
Conscious/
idea
Metacognitive
templates
and heuristics
Conscious level (knowledge based, declarative
knowledge, controlled, intellectual
Flexible action patterns (rule based,
knowledge compilation)
Unconscious/
Skill level (automatic, procedural level)
physical
The model of hierarchical-sequential
action organization
Working through a plan.....
Sequence of a plan and of comparative processes
Sequence of change processes
Arguments for (Weak) Hierarchy
• Weak: because higher level does not
completely determine lower levels
• Higher level triggers lower levels
• Hierarchy explains that we do not need
an unending store of S-R connections
• We are able to generate new plans from
existing ones
• Thoughts can be translated into
action
Moving Up and Down the Hierarchy
Moving up: why an action is done; after a barrier (or
error), opportunities, external pressure
Moving down: how something is done; discre- pancies are
reduced (detection of discrepancy) (Lord & Levy)
We tend to concentrate on here and now (midlevel
conscious goals, not on meta-cognitive ones)
Routines develop when environment is redundant; action
is smoother, more elegant, and done with less effort
(emotional effects of breaking with routines)
Crossing Sequence and Structure
Sequence
Level of
Regulation
Skill
Flexible
action
patterns
Conscious
Metacognitive
Goals Information
Search
Plans Monitoring/
Execution
Feedback
Crossing Sequence and Structure
Level of
Regulation
Plans
Skill
cognitive
Blueprints of elementary movement patterns and
routines
Flexible
action
patterns
Well-known action patterns with situational
specifications
Conscious
Conscious complex plans, strategies
Meta-
Templates, e.g., meta-strategies; general procedures of
how to cognitive plan; coordination of plans
Crossing Sequence and Structure
(Examples)
• Some theories more concerned with sequence and
some more with structure.
• For example, goal setting: Different processes on
different levels  Lower levels: Activation and
general arousal;
Higher levels: Better strategies, concentrating
on important issue (thus good knowledge one
prerequisite of higher level processing)(Wood,
Mento &Locke)
Crossing: The function of good
routines and the function of high
working memory
• Cognitive resources scarce when regulation on a
high level of regulation: This is the case for new,
for complex, and for threat tasks: Here cognitive
ability more important than for old, non-complex,
and routine tasks
• First years, cognitive ability more important than
later
• In unstable environment: cognitive ability more
important
Crossing: Higher Levels of Regulation:
Barriers, Opportunities,
Environmental Pressures
• Barriers or errors: Conscious thinking again
• Opportunities: Recognition may be intuitive (on
lower level of regulation based on prototypes,
routines, automatic heuristics), but use of
opportunities: conscious regulation
• Environmental pressures may mean that we have
to do actions that are not well-rehearsed, e.g.,
business plan
Crossing: Mindfulness Vs. Intuition
• Mindfulness: work on the upper level of regulation: But
only important issues should be regulated on this level.
Whatever can be delegated to lower levels should be
delegated: Try to do a sale pitch and be mindful of your
grammar.
• Intuition – Lower level of regulation: Works only well, if
routines are adequate and expertise is well-developed
(function of deliberate practice)
• Other function of routines: Affect based; more holistic
understanding of situation
• Both are necessary and need to complement each other
Crossing: Rigidity and Ultra-Stability
• Lower levels of regulation: More rigid; thus
always danger of using routines unthinkingly (issue
of heuristics)
• How easy is it to move upwards: The easier – the
more the action is ultra-stable (Volpert): the more I
can use any level of regulation
• True hallmark of expert – who has learnt how to
make routines conscious and know when to rely on
non-conscious routines and when need to change to
conscious
Crossing: Learning
• Learning on all levels. However, problems of
connecting the various levels: Problem of abstracts
thoughts – when does a thought become a regulator
of action?
• People misunderstand their own action regulation,
because lower level regulation is not conscious,
e.g., intuition
• Dilemma: Lower levels are only useful, if
situation stays the same; however, they are
necessary if many features exist and situation is
complex
Dimensions of Action Theory
•Action sequence: Goals, Information search
(orientation), plans, monitoring, feedback
•Action structure: Level of regulation from
conscious (idea level) to automatic (physical)
• Action oriented mental model
Action Oriented Mental Model (Hacker)
Initial state
- Initial states
- Conditions of
execution
Work activities
- Knowledge on
transformation
from initial to
end state
- Methods of action
End state
- Goals as anticipation of results
- Prediction of
future results
The Action Oriented Mental Model as
the Knowledge Base for Regulations
•Includes knowledge on goals, plans, and feedback
•Guides information search
•Selective and distorted: Only represents those
issues that are important for the tasks
•Rough outlines of actions
•Long-term memory
Dynamics of Performance: The Time
Dimension and Environmental
Changes
Changes over time and in the environment
• The better adapted to one environment (in the
sense of routines), the worse if changes in the
environment appear
• Therefore, important to develop routines that can
be easily changed
• Therefore, early warning signs of changes
important (pre-signals, feedback)
• Changes of tasks over time for the successful
entrepreneur: First, all concentrated on survival, and
building up organization, later on improved
leadership/management, organizational routines,
rules etc.
Changes over time and in the environment – 2 –
• Success leads to new requirements; failure to
different ones
• Change is, therefore, more frequent for
entrepreneurial units than for stable, old and
established organizations
• Pressure to innovate with a low level of resources
Action Theory and Learning
Theses on Learning from an Action Theory Point of View
1)
Action oriented knowledge is stored better and more deeply than non-action
oriented mental models.
2)
This speaks for learning through action and action of the learning processes.
3)
Learning takes places on all levels of regulation. That means, action learning is
always conscious and non-conscious.
4)
With practice in redundant environments, actions are regulated more and more
on a routine or non-conscious level.
5)
There is evidence that conscious approaches to learning are more powerful than
non-conscious approaches. This evidence stems from meta-cognitive approaches to
learning as well as through designs that increase meta-cognitive conscious approaches
towards learning.
6)
However, such a conscious representation of the mental model is not a true
image of the problem space but abbreviated heuristic processing.
7)
Still the more adequate mental models include exceptions, boundary lines, and
potential traps and errors of a problem space.
8)
Non-conscious routines are developed in redundant environments. They
function very well as long as the environment does not change. Once the environment
changes, routines have a certain tendency to be used regardless of environmental
feedback. This leads to inefficiencies.
9)
Thus, entrepreneurs, who work in a fast changing environment, have to deal
with two issues simultaneously:
a) because a fast changing environment is complex it needs to be understood again and
again;
b) this requires extra processing capacity;
c) to be able to act but still be able to understand changes, one needs to routinize
everything that is routinizable so that it is possible to process things adequately;
d) however, the number of routines that are then developed may lead to disasters if the
environment changes.
e) Quick flexibility even in routines is necessary (ultra-stability of experts)
This is one of the areas that has not been studied much in cognitive psychology but
which may be of particular importance for entrepreneurship.
Action Training Approach
• Action oriented mental model
• Principles and rules of thumb
• Learning by doing
• Motivation: mismatch of present state and
goal and errors
• Feedback structure
• Maximizing transfer of training
• The problem of old well rehearsed routines
Limits to Good Performance
• cognitive misers
• Satisficing strategy
• Learning specifics, but not general: The function
of action styles in keeping up low performance
• Urgency leading to fast actions based on
routines/heuristics
Training Studies on Personal Initiative and
Psychological Entrepreneurship
Studies done on:
- Unemployed
- Employees
- Firm owners
5 studies
Training Model
TRAINING
Psychological Success
Factors:
Pre-Planning
Goal setting
Personal Initiative
Innovation
Time Management
SUCCESS
Training Study in Germany
Number of
Employees
20
19
Experimental
18
p<.05
Control
12
10
Before
training
1 year
after training
Training Study in South Africa
Sales - Rand
3.56 Mill
3.5 Mill
3 Mill
2.5 Mill
Experimental
2.13 Mill
2 Mill
1.5 Mill
1 Mill
0.61 Mill
Control 0.56 Mill
0.5 Mill
Before
training
2 years
after training