Overconfidence, optimism and entrepreneurship

Abstract

Overconfidence is one of the alleged drivers for market entry. However, establishing its effect is challenging and much of the existing entrepreneurship literature confusingly conflates overconfidence with optimism. In the present study, we use validated scales to analyze the relationship between overconfidence and two important aspects of entrepreneurship, while explicitly controlling for optimism. Specifically, we study the role of overconfidence in developing intentions about entering entrepreneurship as well as how overconfidence relates to entrepreneurial orientation. Our findings show that overconfidence is related to intended market entry but not to the market position (entrepreneurial orientation) of the business.