Ambiguity Tolerance Theory and Entrepreneurship
Ambiguity tolerance theory can be traced back to Polish psychologist Else Frenkel-Brunswik, whose work in 1949 focused on authoritarianism and ethnocentrism in children.
Ambiguous information is everywhere. For many, it leads to the conclusion that there is "no way out," no way to understand, or no viable way to proceed. The decision-making process can become paralyzed by ambiguity that prevents conclusive prescriptions.
The Entrepreneurial Advantage
When there exist high levels of uncertainty about a particular entrepreneurial venture, those individuals who exhibit higher levels of tolerance of ambiguity are more likely to succeed. The ability to tolerate conflicting information and deal with missing information makes the difference.
The more uncertain a particular business opportunity, the more important this trait becomes:
- Traditional Industries (e.g., Restaurants): Market information is generally consistent and known.
- New Industries (e.g., Tech): Market information is vague, conflicting, or non-existent.
Risk vs. Uncertainty
When entrepreneurs enact strategies to create new businesses, they typically do so without knowing the probability that they will succeed. This distinction is crucial:
They are not "taking risk" (where the odds are known, like a casino); they are bearing uncertainty (where the odds are unknown).
Video Overview: Tolerance of Ambiguity
Sources
- Mac Donald Jr, A. P. (1970). Revised scale for ambiguity tolerance: Reliability and validity. Psychological Reports, 26(3), 791-798.
- Schere, J. L. (1982, August). Tolerance of Ambiguity as a Discriminating Variable Between Entrepreneurs and Managers. Academy of Management Proceedings (Vol. 1982, No. 1, pp. 404-408).
