Entrepreneurs’ Overoptimism During The Early Life Course Of The Firm

Z.V. Kambourova and Erik Stam

No 16-14, Working Papers from Utrecht School of Economics

Abstract: Recent research on cognitive biases in decision making suggests that over-optimism critically influences entrepreneurs’ decisions to establish and sustain new firms. This paper looks at entrepreneurs’ over-optimism during the early life course of the firm, in order to uncover the dynamics and persistence of over-optimism. We use a representative sample of start-ups in the Netherlands, which we divide into solo self-employed and employer firms. We find that while there is a persistence of over-optimism for the solo self-employed, namely initial over-optimist are more likely to be overoptimistic in subsequent periods; this is not the case for the employer firms.

Keywords: over-optimism; entrepreneurship; learning; risk-propensity; biases; early life course of the firm; firm growth (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-ent and nep-sbm
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