Decoding decision-making: The interplay of cognitive processes and working capital management constraints in new ventures

Miles M. Yang and Kehan Xu

Journal of Small Business Management, 2025, vol. 63, issue 4, 1921-1948

Abstract: This research delves into the relationship between managerial cognitive frameworks, particularly construal levels, working capital management constraints, and new venture performance. We posit that higher construal levels positively influence venture performance, while working capital management constraints have a detrimental effect, reflecting challenges in resource allocation and cash flow. Our study also suggests that these constraints can temper the benefits of high construal levels on performance. Using a mixed-method approach, we gather data from recently IPOed firms (Study 1) and an MBA cohort experiment (Study 2). Our findings elucidate the intricate interplay between cognitive orientation and financial constraints, offering novel insights into new venture operational management. This research enriches venture financing literature and offers valuable insights for decision-makers navigating the entrepreneurial realm.

Date: 2025
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DOI: 10.1080/00472778.2024.2418020

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