Advising Entrepreneurs: Optimal Recommendation of Alternatives

“

Our analysis reveals that the advisor should strategically recommend alternatives based on the entrepreneur’s execution capability, trial costs, and correlation between alternatives (among other factors). When the trial of the first alternative fails, the advisor should readily offer a new alternative if the entrepreneur’s capability is either very high or very low. Otherwise, the advisor should encourage the entrepreneur to try the same solution multiple times. In order to motivate and sustain the entrepreneur’s exploration over time and across solutions, the advisor may find it optimal to recommend inferior solutions before superior ones (e.g., when trial costs are different or the entrepreneur can improve her capability with experience) or recommend multiple solutions simultaneously (e.g., when there is correlation between alternatives).

”