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The Impact of Overconfidence and Ambiguity Attitude on Market Entry

Cédric Gutierrez (), Thomas Astebro () and Tomasz Obloj ()
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Cédric Gutierrez: Department of Management and Technology and ICRIOS, Bocconi University, 20136 Milan, Italy
Tomasz Obloj: Strategy and Business Policy, HEC Paris, 78351 Jouy en Josas Cedex, France

Organization Science, 2020, vol. 31, issue 2, 308-329

Abstract: We study the behavioral drivers of market entry. An experiment allows us to disentangle the impact on entry across different types of markets of two key behavioral mechanisms: overconfidence and attitude toward ambiguity. We theorize and show that the causal effect of overconfidence on entry is limited to skill-based markets and does not appear in those that are chance based. Moreover, we also find that, independent of confidence levels, individuals exhibit ambiguity-seeking behavior when the result of the competition depends on their skills, which, in turn, leads to higher levels of entry. This preference for ambiguity thus can explain results that have previously been attributed to overconfidence. Our results challenge existing literature that has inferred overconfidence from differential entry levels across types of markets.

Keywords: behavioral strategy; ambiguity; market entry; overconfidence; entrepreneurship (search for similar items in EconPapers)
Date: 2020
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https://doi.org/10.1287/orsc.2019.1300 (application/pdf)

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Working Paper: The Impact of Overconfidence and Ambiguity Attitude on Market Entry (2020)
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