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The role of cognitive structures

22 July, 2015 - 17:45

Most probably the problem is very complex. This study focuses on certain guidelines provided by cognitive psychology. The starting point is the fact that education is focused on providing knowledge and information which are important from the point of view of running a company. It is therefore interesting to look at how the individual copes with information about the world, and here in particular the reality of running your own business, what they do with it, and how relevant it is to their behaviour.

According to cognitive psychologists the individual accumulates knowledge about themselves, others, and the world around them, in cognitive structures. It is on this knowledge that how s/he perceives and interprets themselves, the world, other people, and his/her own relationship with the world, depends. This then affects his/her behaviour. Also of interest to this study are the decisions s/he takes, for example, in the course of running their own business. How the entrepreneurial activity runs will depend on his/her perception and interpretation of the business world, its rules and the principles governing it and himself/herself in relationship with them, which is reflected in his/her beliefs and perceptions.

The information gathered by an individual is generalised in the form of schemata. A cognitive schema is knowledge abstracted from experience, useful for interpreting phenomena, a kind of container of new and similar elements of experience 1. Schemata are created in social interactions and are subject to social arrangements. Among these are scripts, also including roles, and activities, which are cognitive representations of reality. These allow the individual to orient themselves in the world and predict the effectiveness of activities and likelihood of events, such as the set of behaviours typical of an entrepreneur. They also cover different spheres of life, in fact including everything that is associated with business activity. Thanks to them, the world is structured, and individuals know what to do, how to react, etc. As a result, the content of these cognitive schemata and scripts determine the type and form of individual activity. Some of these include running a company. It can therefore be assumed that the course of the entrepreneurial process also depends on them. The question is what relationship arises between cognitive schemata and the formal knowledge that has been transferred in the course of teaching.

This is explained by Seymour Epstein's Cognitive-Experiential Self Theory (CEST) 2. According to this, the individual processes information in two systems: experiential and rational. In the experiential system information is collected from direct experience and on this basis response patterns are formed, resulting in specific behaviours. It is important that it is an automatic learning system that extends beyond the control of consciousness, and the individual at best knows its effects, but is often not fully aware of it. "It works in a preconscious, automatic, non-verbal, associative, fast, effortless, concrete, and at the same time comprehensive manner, and is strongly associated with emotions" 3. It conditions adaptation processes. In the experiential system, there are schemata that are generalizations of one's own, emotionally important experiences. They are preconscious, implicit theories of self and the world and are descriptive and motivational (if-then, means-end relations).

The rational system works with problem-solving processes involving thinking and reasoning. It includes beliefs, i.e. conscious, explicit theories of self and the world. Their sources are the individual's own experiences and social (cultural) communication. Acquisition of beliefs occurs through logical reasoning and rational elaboration of experiences. This process "is conscious, oriented, mostly verbal, not too fast, requires effort, abstract, analytical and mostly free from the direct influence of emotion". 4

We can assume that the content of the individual's cognitive structures concerning running their own business are in the form of cognitive schemata, perceptions and beliefs, as a private theory about what to do to function in business, regardless of what is communicated in the course of formal education. Cognitive psychologists assume that the two systems operate in parallel and that they interact.

The importance of these schemata and beliefs is indicated by the results of Koellinger, Minniti and Schade 5. They researched entrepreneurs from 29 countries including Poland using the Global Entrepreneurship Monitor (GEM) database. According to them, subjective beliefs, and perception of self and the environment are essential for entrepreneurial activity. These in turn are influenced by many factors such as the culture, history, and economic realities of a given country. In their opinion, entrepreneurial decisions are largely based on perception and cognitive mechanisms. This may for example lead to over-confidence and result in the entrepreneur overestimating their control over events, and assessing risk incorrectly.

From the point of view of the development of entrepreneurship it is interesting and important to see how the contents of the cognitive structures in people who want to run their own business, in the form of schemata, scripts, actions, beliefs and perceptions, interact with those that are transferred during formal learning. It is precisely the automated and not fully conscious cognitive schemata that may be crucially important. This is due to the specific nature of entrepreneurial activity. During this, it is necessary to activate the processes of decision-making and behaviours which are non-routine and non-schematic. It is not possible to use the set of algorithms which have a foreseeable result specific to each of the situations in which an entrepreneur may find themselves.

The education process may deliver the instruments, tools, and guidelines, but these may not be enough. They are not universal. The variability and unpredictability of the various business situations requires the application of skills outside the schemata. It is then that the automatic reactions arising from an individual's beliefs and perceptions on how to act in a given situation are activated. The direction is then provided by assumptions as to how things in the world of business are in this case and ensuring effective operation within it. Perhaps the individual activates a script for action which automatically plays shaped by observation of the world and the behaviour of others. It may be that this non-routine response is inconsistent with what education has tried to convey and inapplicable to the rules of the market. However, the individual may not be aware of this and act in the conviction of the rightness of their actions. Thus the acquired school knowledge – a set of procedures to be used in the right way and appropriate to the circumstances – is not applied correctly. The entrepreneur must decide what s/he should use from this kit, and that depends on his/her beliefs, ideas, etc. S/he is in a different situation form, for example, an official who must stick to narrowly defined rules. So if an entrepreneur is guided by erroneous premises, even the best method, for example a marketing tool, used inappropriately, will not bring the expected results.

The more so that according to Zaleśkiewicz  6 entrepreneurs prefer informal information (advice from others) from formal (publications, etc.), because they prefer an intuitive way of thinking that is associational, rather than a systematic and analytical procedure. Manimal 7, however, argues that entrepreneurs use a variety of simplifications in thinking and have an internal orientation in decision making – a tendency to follow their own ideas, avoiding such expert opinion. This could suggest that they are oriented towards and have more confidence in what works in their cognitive structures as a result of their own experiences and thoughts. The objectivised knowledge administered during formal education and based on rational facts is less important to them.

This is also confirmed by Simon 8, "Entrepreneurship seems strongly linked to biased perceptions rather than measures of objective reality, so researchers are turning to entrepreneur's cognitive biases to explain not only entrepreneurial firm creation but also failure." The validity of this line of research is also confirmed by studies on the mindset of entrepreneurs by J. Michael Haynie, Dean Shepherd, Elaine Mosakowski and P. Christopher Earley 9.

The importance of this is apparent at the moment the decision to start your own business is taken, which is nothing other than taking a specific career path. The concepts of vocational development by Super and Gottfredson  10 look precisely at the importance of cognitive processes in the process.

According to Gottfredson 11, in choosing a profession the individual uses information on themselves and the professional environment. Based on this, s/he creates an image of him/herself in the occupational context, and thus a set of ideas arise concerning the occupations – a cognitive map of occupations which may be of interest. The type of information contained in this cognitive map of occupations is determined by the individual's course of action.

Another proponent of developmental theories, Super 12, draws attention to the importance of the individual's self-image, emphasizing that this is a subjective idea of him/herself in a particular role, situation, or social position, and is a source of assessment of his/her own capabilities in the roles undertaken. He also introduces the idea of the vocational self-concept, which is shaped by observing the work situation, identification with others, and with the overall environment.

It should be noted that the information on which the individual makes career decisions is subjective in nature and is the result of their relationship with the environment. So the individual is as if sentenced to the fact that the information obtained is not always objective, but is a variety of stereotypes, generalizations and simplifications functioning in a given society and transferred to them during socialization. This applies both to self-perception as well as ideas about occupations.

According to these concepts of choice of occupation, in this case, the decision to be an entrepreneur is taken on the basis of the contents of the cognitive mental map, and relates to one's own "I", the occupation, and the occupational environment. Since these are ideas about social reality, it is possible to identify in them the same elements that cognitive psychology includes in the cognitive representation of the social world. "Social reality is represented in our minds in the form of events and social activities that have their actors, along with objectives, conditions for activation, barriers, and typical ways of overcoming them."  13 Reykowski writes, however, that cognitive structures include "representations of specific objects: individuals, institutions, symbols, places, objects that surround an individual with whom s/he remains in stable relationships. The network of these relationships determines the nature of the individual-world relationship" 14. In this case, this means the world of entrepreneurship. At the same time a cognitive schema, in addition to descriptive information, also contains data about the emotional relationship to the objects contained therein.

The cognitive map of occupations also includes information about the social roles realised while pursuing a given occupation, in this case by entrepreneurs. In the social reality, individuals play roles, creating a kind of storyboard drama which is played out in the entrepreneurial environment.  15 The entities in these relationships behave according to the descriptions of their role and others associated with the occupation.

It can thus be concluded that an individual acts as an entrepreneur in accordance with how s/he imagines him/herself, defines his/her role, and how s/he identifies with other individuals, their attributes and motives, and rules of operation. This perception of the world will determine his/her decisions, and its relevance to reality will determine their effectiveness in running a business.

From the perspective of these theories, it therefore seems particularly important to examine the cognitive map of the mind to reach these functional aspects of the entrepreneurial individual. There must be a correspondence between formal knowledge and the beliefs about the company, the rules by which it acts and the goals to pursue. The suspicion that there might be inconsistency in this is justified, for example when we take into account the history of the development of Polish entrepreneurship. In the earlier, communist, economic system, any entrepreneurial initiative was gradually destroyed. Many myths and beliefs were also created on the subject that have been saved in the individual's cognitive system and act like Hofstede's cultural programming 16, and may constitute an important barrier to the development of business activity in Poles 17.