Simulating socially situated cognition in exchange creation

In this chapter, using an agent-based- model simulation, we model the socially situated cognition notion that dynamism in cognition results from the moment-to- moment interaction of an entrepreneur’s inner environment and outer environment, using exchange formation as the relevant outcome. We present a fundamental model of exchange: individuals create works for sale to others, as the basis for the simulation. We utilize data from an experiment to represent resource uncertainty and relational uncertainty perceptions as an entrepreneur’s ‘inner environment.' We utilize assumptions developed from the literature to model the outer environment as represented by the ‘entry’ and ‘exit’ rates for each iteration (tick) in the simulation. We observe that both inner and outer environment interactions can be effectively modeled as predicted by socially situated cognition entrepreneurship theory; and that - as suggested by Simon (1981) - inner environments form a foundation whereby variations in a dynamic outer environment have more impact on exchange creation than would be expected when looking at variations in the inner environment alone. The implications of this simulation for theory building in socially situated cognition entrepreneurship research are explored.