Sensemaking in entrepreneurial ventures

In this thesis, I examine the socio-cognitive processes of sensemaking in entrepreneurial ventures, through observing the language and behaviour of board directors in such ventures. Entrepreneurial ventures often require venture capital as a source of finance and the venture capitalist often places a non-executive director, termed an investor director, on the board of the venture to primarily look after their interests. Although there are many minor deviations from the business plan over time, substantial adverse deviations from plan also occur, which if not addressed, have the potential to jeopardise the survival of the business. These more substantial deviations from plan may invoke the investor directors to consider changing the direction of the venture, which is an ideal setting in which to study sensemaking because there is a need for the venture’s stakeholders, whom the board of directors represent, to seek new understanding of the change. Processes such as sensemaking and sensegiving involve observing and interpreting individuals and groups of homogeneous actors, and in the context of entrepreneurial ventures, this has yet to be considered involving the constructions and accounts of such actors constituting the board of directors. My study calls for a qualitative method, like previous studies in this area, with the potential to compare situations across similar case studies of comparable organisations, and hence I obtained longitudinal data through semi-structured interviews and desk research over thirteen years from archival, historical and real-time field observations from board directors to observe how board processes unfold over time. In total, six sensemaking episodes were selected where the companies adversely deviated substantially from the warranted business plan. The decisions that followed each sensemaking episode were varied; two episodes were followed by consensual board decisions, two episodes were followed by forced board decisions whereby some board members disagreed or agreed reluctantly to support the board decision, and two were followed by protracted indecision, resulting in board paralysis and eventual company failure. From this empirical study, I present new processes with discrete phases for both encapsulated and open sensemaking; the two types of sensemaking observed from the empirical data. I argue that the use of economic capital and power dynamics used during encapsulated sensemaking may be antagonistic to consensual decision-making and these findings run counter to the traditionally held view that sensemaking assists in moving chaotic situations to a more ordered environment and one in which sensemaking unfolds in a manner which progressively increases the likelihood of venture failure, suggesting that not all sensemaking is positive. In understanding the various phases, I present relationships between actors’ social positions and their sensemaking in entrepreneurial ventures and consider the effects of sensemaking, power and the mediation skills of the Chair on the strategic decision-making outcomes of the sensemaking process.