Overconfidence, misjudgment, and entry in experimental entrepreneurial markets: evidence from Panama

Valentina Rotondi

Entrepreneurship & Regional Development, 2024, vol. 36, issue 5-6, 816-832

Abstract: This paper investigates the influence of overconfidence and misjudgement of merit on the decision to enter a winner-take-all market. Through a lab-in-the-field experiment conducted in Panama’s dynamic and diverse entrepreneurial ecosystem, the study addresses a research gap by exploring the interplay between overconfidence, institutional factors, and entrepreneurial activities. The findings confirm the role of overconfidence as a determinant of market entry and reveal that overconfidence primarily empowers individuals already embedded in entrepreneurial net- works, regardless of their destructiveness. These results suggest that in the presence of weak institutions, overconfidence does not promote entrepreneurship but rather motivates those with pre-existing entrepreneurial networks to open new ventures. However, this situation has the potential to exacerbate inequalities, especially if these ventures make only marginal contributions to overall social output.

Date: 2024
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DOI: 10.1080/08985626.2023.2241851

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