Impact of Past Entrepreneurial Outcomes on Strategic Orientation: A Prospect Theory Perspective

Purpose - This study aims to investigate how serial entrepreneurs' past experiences of success or failure influence their strategic preferences for differentiation or cost leadership strategies. The research applies prospect theory to understand the dynamic nature of entrepreneurs' risk preferences and strategic orientation in the context of serial entrepreneurship. Design/Methodology - The study utilizes data from the 2019 Venture Business Accuracy Survey, provided by the Ministry of SMEs and Startups of the Republic of Korea. This dataset allows for the examination of serial entrepreneurs' strategic preferences and behavior in a relatively stable business environment, controlling for potential external shock effects such as COVID-19. Logistic regression analysis was employed to identify odds ratios and marginal effects. Findings - The results indicate that serial entrepreneurs with experience of failure are more likely to adopt a differentiation strategy, suggesting a higher propensity for risk-taking behavior. Conversely, entrepreneurs with past experiences of success demonstrate risk-averse behavior and tend to favor cost leadership strategies. These findings align with the predictions of prospect theory, highlighting how past outcomes influence future strategic decisions in entrepreneurial contexts. Originality/value - This study's originality lies in its application of prospect theory to the field of serial entrepreneurship, particularly in a non-Western setting. By examining the impact of previous entrepreneurial experiences on subsequent strategic decisions, the research contributes to a broader, more comprehensive understanding of entrepreneurial behavior and strategy formulation. This approach provides valuable insights into the dynamic nature of risk preferences and strategic orientation among serial entrepreneurs, offering implications for both theory and practice in entrepreneurship and strategic management.