When should an entrepreneur reconsider?

Entrepreneurs, just like everyone else, approach new situations with preconceptions about how the world works and what will happen. But they often make decisions amid great uncertainty. Will customers want the product or service? Can the technology be developed? And when are there sufficient reasons to stick with an idea—or to rethink it?

This is the starting point for the research anthology Bayesian Entrepreneurship. The editors — Ajay Agrawal, Arnaldo Camuffo, Alfonso Gambardella, Joshua Gans, Erin L. Scott, and Scott Stern — have brought together some 20 researchers. Together, they offer different perspectives on how entrepreneurs form their perceptions of new opportunities and revise them as new information becomes available. Simply put, the Bayesian perspective is about weighing what you learn against what you initially believed. Among other things, the book discusses the role that experience, data, advice, and experimentation play in that process.

Experimentation is an important part of learning, but an entrepreneur cannot test everything. Gathering new information costs both time and money, and the results must also be interpreted before they can guide the next step. A key question, therefore, is what information is worth gathering, which assumptions should be tested, and when new knowledge should lead the entrepreneur to stick with the idea, adjust it, or rethink it. The 14 chapters explore entrepreneurial learning and decision-making from various perspectives and also discuss how these concepts can be applied in entrepreneurship education and practice.

Bayesian Entrepreneurship is about how entrepreneurs make decisions when much is still unclear, and how new experiences and new information can change those decisions along the way.

The book is published by MIT Press and is available to read for free via open access.