Ambiguity Tolerance Theory and Entrepreneurship

What is the ambiguity tolerance theory of entrepreneurship?

Ambiguity tolerance theory can be traced back to Polish psychologist Else Frenkel-Brunswik, whose work in 1949 focused on authoritarianism and ethnocentrism in children. Ambiguous information is everywhere and it can lead to the conclusion that there is no way out, no way to understand, or no viable way to proceed. The decision-making process can become paralyzed by ambiguity that prevents conclusive prescriptions.

When there exist high levels of uncertainty about a particular entrepreneurial venture, those individuals that exhibit higher levels of tolerance of ambiguity, are more likely to succeed. The ability to tolerate conflicting information and deal with missing information makes the difference.

The more uncertain a particular business opportunity, the more important it is that individuals are capable of tolerating the demands of conflicting information and vague information. We might expect that ventures of traditional business types, like restaurants, might get more consistent information, whereas those in new industries, such as technology companies would have more ambiguous market information.

When entrepreneurs enact strategies to create new businesses, they typically do so without knowing the probability they will succeed. They are not taking risk, they are bearing uncertainty.