The role of demand routines in entrepreneurial judgment

Abstract

One of the main problems in fully integrating uncertainty in entrepreneurship process theory is how to distinguish entrepreneurial competence from pure luck. We propose a routine-based approach where entrepreneurs use their idiosyncratic knowledge to identify emergent demand routines—that is, standardized demand behavior lacking specifically adequate artifacts—that can serve as an objective reference point to their judgment of emergent opportunity situations and coordination of resources. Uncertainty is assessed from its structural nature to its endogenous origins in creatively reflexive market interactions. Routines reduce uncertainty when agents choose to adopt standardized behavior over ad hoc creative action. Thus, routines stabilize market interactions as they get increasingly more established, though emergent demand routines are volatile enough to allow for price divergences. Entrepreneurs can cohesively or generatively introduce products as specific artifacts for these routines, thus making profits by either consolidating or triggering (or both) emergent demand routines in the market. Entrepreneurial competence is thus a matter of convergence between entrepreneurial idiosyncratic judgment and emergent demand routines resulting in unique situations, which explain differences among entrepreneurs, serial business creation, and business longevity.