Regulatory focus theory of entrepreneurship
Regulatory Focus Theory: Playing to Win vs. Playing Not to Lose
Why do some entrepreneurs bet the farm on a risky idea, while others obsess over protecting their downside? The answer often lies in Regulatory Focus Theory.
Developed by psychologist E. Tory Higgins at Columbia University in the 1990s, this theory argues that human motivation isn't a single setting. Instead, individuals toggle between two distinct psychological states: Promotion Focus and Prevention Focus.
The Two States of Mind
At the core of the theory is the idea that your mindset determines how you approach risk and goals:
- Promotion Focus (The "Ideal Self"): When in this state, you focus on growth, advancement, and "hopes." You play to win. You are willing to take risks to achieve a potential gain.
- Prevention Focus (The "Ought Self"): When in this state, you focus on safety, security, and "duties." You play not to lose. You avoid risks to prevent a potential loss.
Application to the Entrepreneurial Process
Brockner et al. (2004) applied this psychology to business, arguing that successful entrepreneurship requires the ability to switch gears.
The entrepreneurial process demands different focuses at different stages:
1. Idea Generation (Requires Promotion Focus)
When brainstorming, you need to focus on the "Ideal Self." You need a Promotion Focus to generate wild, disruptive ideas without worrying about failure.
2. Idea Screening (Requires Prevention Focus)
When doing due diligence, you need to switch to the "Ought Self." You need a Prevention Focus to identify flaws, assess financial risks, and ensure the business model is sustainable.
"For certain aspects of the entrepreneurial process (e.g., generating ideas...), greater promotion focus is necessary. For other aspects... (e.g., doing the 'due diligence' when screening ideas), greater prevention focus is necessary." — Brockner et al. (2004)
Environmental Fit
Success also depends on matching your mindset to the market environment. Hmieleski and Baron (2008) found that:
- Dynamic Environments: Entrepreneurs with a Promotion Focus perform better in fast-changing, chaotic markets where speed wins.
- Stable Environments: Entrepreneurs with a Prevention Focus perform better in steady industries where efficiency and error-avoidance are key.
Self-Efficacy and Intentions
Finally, Johnson et al. (2017) found that these traits predict commercialization. A strong chronic Promotion Focus leads to strong intentions to commercialize research. Furthermore, Tumasjan and Braun (2012) suggest that Self-Efficacy (confidence) enhances the power of the Promotion Focus, acting as a turbo-charge for opportunity recognition.
Video: Promotion vs. Prevention
References
Brockner, J., Higgins, E. T., & Low, M. B. (2004). Regulatory focus theory and the entrepreneurial process. Journal of Business Venturing, 19(2), 203-220.
Higgins, E. T. (1998). Promotion and prevention: Regulatory focus as a motivational principle. In Advances in Experimental Social Psychology (Vol. 30, pp. 1-46). Academic Press.
Hmieleski, K. M., & Baron, R. A. (2008). Regulatory focus and new venture performance: A study of entrepreneurial opportunity exploitation under conditions of risk versus uncertainty. Strategic Entrepreneurship Journal, 2(4), 285-299.
Johnson, M., Monsen, E. W., & MacKenzie, N. G. (2017). Follow the leader or the pack? Regulatory focus and academic entrepreneurial intentions. Journal of Product Innovation Management, 34(2), 181-200.
