Biased and overconfident, unbiased but going for it: How framing and anchoring affect the decision to start a new venture

Saulo Dubard Barbosa, Alain Fayolle and Brett R. Smith

Journal of Business Venturing, 2019, vol. 34, issue 3, 528-557

Abstract: Cognitive heuristics, biases, and overconfidence have been suggested as an explanation for entrepreneurial entry. Nevertheless, empirical research on the subject has produced mixed findings and has under-explored the cognitive mechanisms leading to overconfidence in entrepreneurial settings. In two within-subject experiments, we focus on three cognitive heuristics—reference point framing, outcome salience framing, and anchoring in conjunctive events—and examine their effects on perceived risk, confidence, required and estimated probabilities of success, and the decision to start a new venture. Our findings show that reference point framing and outcome salience framing affect the decision to enter directly and indirectly via risk perception, but do not affect confidence. In addition, the effect of anchoring is contingent on the congruence between its semantic and its numeric influences. Overconfidence only obtains when the numeric and semantic influences of anchoring are aligned and aimed at enhancing the salience of potential positive outcomes, i.e., through high probabilities of success.

Keywords: Entrepreneurial decision; Overconfidence; Anchoring; Framing; Heuristics (search for similar items in EconPapers)
JEL-codes: D80 D81 G41 J23 L26 M13 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbvent:v:34:y:2019:i:3:p:528-557

DOI: 10.1016/j.jbusvent.2018.12.006

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