Edinburgh Napier University

  Orientation: The article discusses the parameters that underlie the perception of risk amongst SME owner-managers.
Research purpose: This article draws on research suggesting that interactions between industry-sector (situational) differences and cognitive biases may often be decisive in moulding risk perceptions.

Motivation for the study: Literature suggests that one of the most significant challenges facing entrepreneurs is the development of a clear understanding of what it means to experience and conceptualise ‘risk’ within the context of business entrepreneurship.

Research design, approach and method: Utilising data obtained from a random sample of 446 SME owner-managers in the south-east of England, this study employs a combination of tests, including a non-parametric test, Chi-square test and Cramer’s V statistics test, to derive a series of thematic propositions that contribute to our understanding of how these entrepreneurs perceive decision risk.

Main findings: Findings highlight the situational decision factors that influence SME owner-managers to overemphasise possible negative outcomes, thus constraining the creative imagination upon which their entrepreneurship depends.

Practical/managerial implications: It is generally accepted that decisions that may be highly innovative are not necessarily risky, unless the entity concerned is innovating in order to survive and its innovations have strategic significance. Based on this, we posit that there is an urgent need for entrepreneurs to focus less on risk associated with innovation and more on comprehensive analysis of all risk and uncertainty present around business-critical decisions.

Contribution/value-add: This study contributes to growing research examining the relationship between SME risk and innovation, which is at present sparse.