Entrepreneurial actions and optimistic overconfidence: The role of motivated reasoning in new product introductions

Mark Simon and Rodney C. Shrader

Journal of Business Venturing, 2012, vol. 27, issue 3, 291-309

Abstract: Optimistic overconfidence (OO), that is, being certain of success only to end up disappointed, represents a potentially catastrophic error. However, few studies have identified which entrepreneurial actions are associated with it. To explore this issue, we examined 55 small companies and found that OO of product success was positively related to introducing products that required more resources and were more pioneering. Furthermore, satisfaction with company performance had a curvilinear (U-shaped) relationship with overconfidence. Both high and low levels of satisfaction were associated with greater OO in product introductions. In addition, the bias was positively correlated with entering hostile environments; that is, environments that are characterized by intense competition that threatens a firm and its introductions. Contrary to expectations, however, OO was negatively associated with environmental dynamism; defined as environments that embody frequent and large changes. The research also compared general knowledge overconfidence to OO, concluding that each represents a distinct bias with distinct effects.

Keywords: Overconfidence; Entrepreneurship; New product introductions; Motivated reasoning (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:27:y:2012:i:3:p:291-309

DOI: 10.1016/j.jbusvent.2011.04.003

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