Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation

Mario Amore (), Orsola Garofalo () and Victor Martin-Sanchez ()
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Orsola Garofalo: Department of Strategy and Innovation, Copenhagen Business School, 2000 Frederiksberg, Denmark
Victor Martin-Sanchez: King’s Business School, King’s College London, London WC2B 4BG, United Kingdom

Organization Science, 2021, vol. 32, issue 4, 940-964

Abstract: Extant research shows that entrepreneurs are typically overly optimistic about their ventures’ prospects and that such optimism hampers performance. We analyze how dispositional optimism affects the adjustments to entrepreneurs’ expectations after they receive negative feedback on their task performance. We then explore the relationship between optimism and the effectiveness of innovation. Exploiting unique firm-level data and a laboratory experiment involving 205 entrepreneurs, we find that dispositional optimism is negatively associated with both the likelihood and extent of belief updating in response to negative feedback. Furthermore, dispositional optimism triggers a discrepancy—between innovation inputs and outputs—that reduces a firm’s innovation effectiveness.

Keywords: dispositional optimism; belief updating; entrepreneurship; negative feedback; innovation (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:32:y:2021:i:4:p:940-964

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