Learning Objectives

• 1. To understand the interconnectedness between psychology and entrepreneurship

• 2. To introduce different cognitive biases confronted by an entrepreneur

• 3. To learn about different types of personalities and attitudes of entrepreneurs

• 4. To familiarize with different sets of emotions of an entrepreneur

• 5. To recognize the role of an entrepreneurial mind-set, and how it becomes a differentiating factor for an entrepreneur

Opening Scenario: Apple and US Book Publishers

The US Department of Justice (DOJ) sued Apple and five major US publishers for colluding to raise the prices of ebooks. Three of the publishers settled the suit; two others and Apple were unwilling to settle.

The publishers had negotiated a new business model for ebook pricing with Apple as it prepared to launch the iPad: in exchange for a 30 percent sales commission, Apple would let the publishers set their own prices for ebooks. For the publishers, this pricing model appeared to be a vast improvement on their wholesaling arrangement with Amazon. After at least one of the publishers threatened to delay the release of its digital editions, Amazon reluctantly replaced its flat $9.99 price for ebooks with Apple’s model, and prices rose industry-wide to about $14.99 on average.

The DOJ’s lawsuit suggests that the negotiators and attorneys involved may have neglected to thoroughly analyze whether their agreement would truly create value for consumers and thus whether it fell within the parameters of US antitrust law. In the flush of hammering out a deal that appears to create synergy for everyone involved, negotiators sometimes neglect to consider how their agreement could affect outsiders, an oversight with ethical and legal implications.

Understanding Interconnections between Psychology and Entrepreneurship

Entrepreneurship has a multidisciplinary perspective. Disciplines such as psychology, economics, sociology and anthropology contributed to the development of the field of entrepreneurship during the last years. Psychology is one discipline that has had a strong influence on entrepreneurship. Essentially, psychological characteristics as demonstrated by the entrepreneur play an important role in entrepreneurship. Major scholars, such as Schumpeter (1934) and later McClelland (1967), have contributed to the psychological perspective particularly in terms of individuals and their behavior also; economic and strategic theories have been used to understand entrepreneurship (Kirchhoff, 1991).