Information processing and strategic decision-making in small and medium-sized enterprises: The role of human and social capital in attaining decision effectiveness

The decision-making literature emphasizes that in high-stake decisions the characteristics of individual decision-makers, their interpretation of decision situations, and their social ties play an important role in decision outcomes. Despite these results, research on small- and medium-sized enterprises has only partially covered these influences. In a sample of 565 small-business owners, this study identifies the extent to which these characteristics and social ties affect decision effectiveness and the extent to which their impact is mediated by evaluative judgements of the decision situation. Our results suggest that the interplay between human capital and social capital affects decision outcomes via evaluative judgments and this effect is moderated by decision content, in such a way that depending on decision content (internal versus external focus) entrepreneurial experience and the breadth of social capital are either assets or liabilities for decision effectiveness.
Keywords: confidence level, decision effectiveness, decision topic, evaluative judgements, human capital, risk acceptance, social capital