Betting on the wrong horse: The antecedents and outcomes of entrepreneur’s opportunity regret

Highlights

• The nature of regret entails positive and/or negative consequences for opportunity recognition.

• Psychological characteristics and differing circumstances influence venture outcomes.

• Individuals should try to regulate their feelings of regret and look at the bright side.

Abstract

We examine opportunity regret, which entrepreneurs may feel as they compare their own new venture opportunities with superior opportunities others have realized. We conjecture opportunity regret will be associated negatively with entrepreneurs’ equity stake in the venture and work–life satisfaction. In addition, we predict entrepreneurs with high personal accountability and female entrepreneurs will be less likely to experience opportunity regret. Structural equations modeling analysis of data collected from entrepreneurs in the United States who have launched a new venture provided support for all hypotheses. In conclusion, we argue entrepreneurs must be aware of the Januslike nature of regret, which may encourage the reassessment and readjustment of identified opportunities but also may hinder the discovery of new opportunities.

Introduction

Regret represents a form of emotionally charged self-criticism (“kicking oneself”) that in some cases may lead to bitter self-recrimination or even self-flagellation (Gilovich et al., 1998, Kahneman and Miller, 1986, Landman, 1993, Philippe et al., 2018, Pieters and Zeelenberg, 2005, Pieters and Zeelenberg, 2007, Ritov and Baron, 1995, Ritov and Baron, 1996). Regret may be construed as a reaction to a purportedly unwise decision resulting in an unfavorable outcome that perhaps would not have materialized had the decision maker acted instead of doing nothing, avoided acting altogether, or acted differently. Consequently, counterfactual thinking—that is, comparing what actually happened to imaginary scenarios with more advantageous outcomes—drives regret (Tykocinski & Pittman, 2001, Tykocinski and Pittman, 2004, Zeelenberg et al., 1998, Zeelenberg, 1999a, Zeelenberg, 1999b).

In this sense, regret is different from grief (Shepherd, 2003) or feelings of guilt or shame about one’s actions and/or oneself (Shepherd and Patzelt, 2016, van Gelderen et al., 2015) because it is both backward-looking and forward-looking. Regret is not only about taking another look at the past but also about making new decisions, resolutions, and plans. Thus, it has a dual, Janus-like nature. On the one hand, regret represents a negative affect that can be extremely unpleasant and may lead to intense suffering (Landman, 1993). On the other hand, regret can help an individual reevaluate their actions and options (Roese, 1997) and reassess those factors in light of best practices, thus driving continual self-improvement and self-advancement (Roese and Summerville, 2005, Pieters and Zeelenberg, 2005, Zeelenberg and Pieters, 2007). Therefore, regret is a complex emotion that may represent both an antecedent and a consequence of decision-making (George & Dane, 2016).

Initial research on entrepreneur regret has focused on the question of whether entrepreneurs are more or less likely than other people to engage in counterfactual thinking (Baron, 1998, Baron, 2000a, Baron, 2000b, Markman et al., 2002, Markman et al., 2005). Some studies have established that overoptimistic and overconfident entrepreneurs are less likely than nonentrepreneurs to feel regret (Baron, 1998, Baron, 2000a, Baron, 2000b). By contrast, other studies have shown that entrepreneurs are more likely than nonentrepreneurs to experience regret, possibly because they constantly deal with adversity; therefore, they must continually reassess their actions to correct themselves appropriately (Markman et al., 2002, Markman et al., 2005).

Subsequent research has determined that regret may be related negatively to entrepreneurial self-efficacy (Arora et al., 2013); that entrepreneurs may seek to avoid anticipated regret, which affects the actions they choose (Hatak & Snellman, 2017); that regret may influence action inertia if the opportunity is regarded as similar to the one dismissed earlier (Wood et al., 2017); and that entrepreneur regret may be related not only to business underperformance but also to health problems and unhappiness in terms of work-life balance (Hsu et al., 2019).

Although prior research has produced many valuable insights regarding entrepreneur regret (Baron, 2000a, Baron, 2000b, Hatak and Snellman, 2017, Hsu et al., 2019, Markman et al., 2002, Markman et al., 2005, Wood et al., 2017), we still know little about its nature and manifestations, principal causes, and outcomes. It is important to better understand entrepreneur regret because it may play a key role in the entrepreneurship process by providing the entrepreneur with critical feedback regarding the comparative advantage of an opportunity originally used for venture creation. Entrepreneurs do not merely identify and explore an opportunity (Mahto and McDowell, 2018, Shane, 2000, Shepherd et al., 2007, Short et al., 2010); they also continually reassess the opportunity they have discovered because its quality and value may change over time. In this paper, we redefine entrepreneur regret as opportunity regret, or regret the entrepreneur may experience while critically reassessing a venture creation opportunity that provides the impetus for continual review and refinement of entrepreneurial actions.

The purpose of this paper is to examine the antecedents and outcomes of opportunity regret. By applying structural equations modeling (SEM) to data collected from student entrepreneurs who founded new ventures, we demonstrate that opportunity regret is (a) associated negatively with entrepreneurs’ personal accountability, (b) associated negatively with entrepreneurs’ ownership stake in a new venture, (c) associated negatively with gender (i.e., women are less likely than men to experience regret), and (d) associated negatively with entrepreneurs’ work–life satisfaction. However, it is important to point out that we conducted the study in California (United States). California has an ingrained entrepreneurial culture. It is not unusual for university students to operate their own ventures. Some may be seasoned entrepreneurs returning to college after accumulating substantial business experience and rich life experiences.

This paper is structured as follows. In the first section, we provide a review and reconceptualization of prior research on entrepreneur regret. In the second section, we develop the hypotheses regarding the antecedents and outcomes of opportunity regret. In the third section, we describe our methods and explain the results of the study. Finally, we discuss our findings and their limitations and point out future directions for research on opportunity regret.