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The Multifaceted Entrepreneurial Overconfidence: Variations in its Extent, Form and Effect on Growth Expectations

Proceeding: 6th International Conference Innovation Management, Entrepreneurship and Sustainability (IMES)

Publication Date:

Authors : ;

Page : 1035-1046

Keywords : Self-efficacy; overconfidence; growthexpectations; entrepreneurship; theory of planned behavior;

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Abstract

In this article, we seek to answer why many attempts to empirically link entrepreneurial self-efficacy to growth expectations have failed. While doing so, we reconcile the literature on entrepreneurial self-efficacy and overconfidence. By analyzing GEM data, first, we show that early-stage entrepreneurs’ self-efficacy statements are systematically inflated. Our results also indicate that entrepreneurial overconfidence is fading and its form changesas business owners learn and gather experience. In addition, by using Ajzen’s Theory of Planned Behavior as a modeling framework, we illustrate that overconfidence results in exaggerated firm growth expectations. However, the changes in the form of overconfidence and the adjustments of expectations on market conditions as a venture ages alter the relationship between overconfidence and growth expectations across the business life-cycle stages. In this article, we seek to answer why many attempts to empirically link entrepreneurial self-efficacy to growth expectationshave failed. Design/methodology/approach:The pooled 2010-2014 GEM APS (Adult Population Survey) individual datasetof the innovation driven countries was usedto empirically test our hypotheses. Findings:Our results show that the variations in the form of overconfidence (relative or absolute), the subsequent changes in the mode its influence operates (direct or indirect) and the update of other business expectations alter the relationship between self-efficacy and growth expectations as business owners gets more experienced. Research/practical implications: Overconfidence and its effect on growth expectations vary as business owners are learning by doing. Merging nascent and baby businesses in a combined start-up “entrepreneurship” measure is problematic. Originality/value:Our research contributesto the “black box”of interactions between entrepreneurial attitudes, activity and aspirations. We theoretically and empirically corroborated the variations in in the relationship between self-efficacy andexpected firm growth across the business life-cycle stages.

Last modified: 2018-09-23 14:39:07