Identifying situations under which overconfidence bias could be helpful for entrepreneurs

Document Type : Research Paper

Authors

1 Phd Candidate, Faculty of Entrepreneurship, University of Tehran, North Kargar, Tehran, Iran

2 Phd Candidate, Faculty of Entrepreneurship, University of Tehran, North Kargar, Tehran, Iran,

3 Associate Professor, Faculty of Entrepreneurship, University of Tehran, North Kargar, Tehran, Iran

Abstract

One of the most important and well-recognized entrepreneurial decision making biases is overconfidence. Overconfidence is by far the most famous entrepreneurial decision bias, overconfidence has been identified as one leading factor in entrepreneurial risky decisions, and it has been hypothesized and proved as one of the causes of entrepreneurial unprepared entry decisions and subsequent failure. The main body of existing literature on entrepreneurial overconfidence has concentrated mainly on its negative effects. But, the question arises here that, is overconfidence always harmful? Or, could it be that, under today’s specific and unique entrepreneurial environment, marked by ambiguity, uncertainty and incessant change, overconfidence may be also helpful? According to the existing literature, some of the most obvious characteristics of overconfident entrepreneurs are not searching for additional information and not considering the existing information fully and meticulously, they also do not feel any regrets after making a decision and feel confident and sure about it. Thus, one could hypothesize that under conditions such as information overload and time pressure that entrepreneurs don’t have time to assess all the gathered information, overconfidence could be indeed helpful in helping them making decisions in a given span of time and overcoming any hesitation or regret. As an indication of its novelty and newness, this paper has focused on the positive side of overconfidence as one of the most common entrepreneurial decision making biases. Data has been obtained by in-depth interviews with 16 Iranian entrepreneurs in a comprehensive qualitative research method. Our study shows that under conditions like lack of data, information overload and time pressure, entrepreneurs’ overconfidence and reliance on their own judgment has been their only guide to make quick decisions.

Keywords

References

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