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A Hubris Theory of Entrepreneurship
Abstract
This paper develops a hubris theory of entrepreneurship to explain why so many new ventures are created in the shadow of high venture failure rates: More confident actors are moved to start ventures, and then act on such confidence when deciding how to allocate resources in their ventures. Building on theory and evidence from the behavioral decision-making literature, we describe how founders' socially constructed confidence affects the manner in which they interpret information about their prior and current ventures. We then link founders' propensity to be overconfident to their decisions to allocate, use, and attain resources. In our model, founders with greater socially constructed confidence tend to deprive their ventures of resources and resourcefulness and, therefore, increase the likelihood that their ventures will fail. [PUBLICATION ABSTRACT]
... Entrepreneurship is a key driver of productive activities and innovation, contributing to wealth creation through new economic opportunities (Wong et al., 2005) and reduced poverty, especially among countries with low income and high inequality (Asongu and Odhiambo, 2023). Growth in entrepreneurial activities is influenced by various factors, including financial capital (Gregory, 2019;Demirgüç-Kunt and Singer, 2017), technology development and exchange (Nguyen Chau et al., 2024), business opportunities and policy support (Schwab, 2018) and human capital associated with the ability to identify and take on new business opportunities (Koudstaal et al., 2016;Hayward et al., 2006). ...
... The literature distinguishes between actual human capitalmeasurable attributes such as formal education and technical skillsand perceived human capital or an individual's selfassessed capabilities (Dutta and Sobel, 2018;Liao and Welsch, 2008;Reynolds et al., 2005;Davidsson and Honig, 2003). The human capital theory (Becker, 1964) and hubris theory (Hayward et al., 2006) both suggest that while human capital is important in driving economic growth, higher levels of human capital are not always associated with increased entrepreneurial activities. ...
... We develop from the hubris entrepreneurship theory to suggest that high levels of self-capability or overconfidence may weaken the positive effects of FI on entrepreneurial growth. The hubris entrepreneurship theory proposes that self-perceived capabilities add value to early-stage entrepreneurship (Hayward et al., 2006). This is because high levels of selfcapability can result in a cognitive bias, leading entrepreneurs to overestimate their chances of success and underestimate both the resources needed and potential risks involved in starting a new venture (Singh, 2020;Gielnik et al., 2020;Brush et al., 2017;Robinson and Marino, 2015). ...
Purpose
This study aims to reexamine the moderating role of human capital on the effect of extended financial inclusion (FI) for entrepreneurship, using data from the Global Entrepreneurship Monitor for a sample of 42 countries from 2006 to 2017.
Design/methodology/approach
This study distinguished between actual and perceived human capital. Actual human capital was measured through formal education while perceived human capital was captured by self-perceived capabilities for business start-ups. The moderating role of human capital was captured by the interaction terms between FI and human capital to investigate how the effects of FI on entrepreneurship vary with levels of human capital. The estimation used the panel-corrected standard error estimators and the two-step system generalized method of moments estimators.
Findings
Higher levels of formal education decrease the positive effect of extended FI on entrepreneurial activities. Individuals with high levels of self-capability do not leverage FI for entrepreneurial activities as much as those with lower levels of perceived capability. The results are robust to different estimation methods and different forms of actual human capital.
Research limitations/implications
Both financial and human capital matter for new business formation worldwide. The findings suggest that FI policies must account for the decreasing effect in response to high levels of human capital. Future research should explore different measures of entrepreneurial performance, various types of entrepreneurship and entrepreneurship across gender groups to gain deeper insights into strategies for promoting entrepreneurship.
Practical implications
Education strategies should focus on specific types of education, such as entrepreneurship education with financial literacy, rather than traditional academic curriculum, to foster entrepreneurship knowledge, skills and creativity. Likewise, entrepreneurship support schemes should aim to nurture and share appropriate levels of self-efficacy, avoiding excessively high self-efficacy, which is deleterious to the benefits of FI for entrepreneurial activities.
Originality/value
This study offers novel evidence of the decreasing effects of FI on entrepreneurial activities in response to increased actual and perceived human capital.
... Second, we enhance the hubris theory of entrepreneurship by highlighting how hubris contaminates the processes underpinning a firm's exit strategy. Furthermore, we broaden the received spectrum of analysis by moving our scrutiny from the "how," "when," and "why" hubristic founders' decisions affect the success/failure of their new ventures (see Hayward et al., 2006Hayward et al., , 2010Sundermeier et al., 2020) to the "how," "when," and "why" hubristic founders make decisions about a future entrepreneurial exit. Notably, hubris bias can boost the performance to touching the extremes. ...
... Scholars have widely accepted the argument that cognitive biases can impact the allocation, management, and re-configuration of firm resources when studying various phases of the entrepreneurial journey (Fatma & Ezzeddine, 2019;Hayward et al., 2006;Zhang & Cueto, 2017). Actually, the influence of firm-level and individual factors on the founders' exit intentions may vary significantly depending on the entrepreneurial interpretation of these circumstances (Corner et al., 2017). ...
... Concurrently, an excess of pride leads hubristic entrepreneurs to consider the contribution of others to their firm success as marginal or negligible. Furthermore, Hayward et al. (2006) explained that an excess of confidence in knowledge and prediction prompts hubristic founders to start businesses by exploiting limited resources. Emami et al. (2024) argued that entrepreneurs' hubris negatively impacts their social Content courtesy of Springer Nature, terms of use apply. ...
Plain English Summary
In business practice, it is not surprising to observe that entrepreneurs who have earlier been successful are afflicted by hubris. We outline how hubristic founders cope with their exit strategies from their firms. We identify three critical elements for developing fruitful reflections on entrepreneurship. First, when founders are affected by hubris, they overlook the possibility of voluntarily alienating their firms. Second, they tend to set a high-performance threshold because they struggle to admit negative performance. When firm performance falls below the expected threshold, hubristic founders tend to increase investments in the same strategic choices, leading them to experience low performance. Consequently, the outcome of such a spiral is likely to be firm bankruptcy. There is, instead, a low probability that this perseverant approach might lead to positive firm performance in the long term. Third, hubristic founders tend to exit the business using a financial harvesting strategy when a firm performs above the expected threshold. In a nutshell, this study calls founders to look at the fundamental distortions generated by entrepreneurial hubris in exit strategies and provide illustrative cases, quotes, and anecdotes. As a result, entrepreneurs might become more sensitive to hubris fallout and, hence, be encouraged to use tools that can help them prevent, or at least mitigate, the pernicious effects of hubris.
... Similarly, psychological capital (Luthans et al., 2006), which comprises personality dispositions of hope, efficacy, resilience, and optimism, has been shown to influence the formation of entrepreneurial intention in adolescents (Salavou et al., 2023) as well as the wellbeing of employees (Avey et al., 2010). Third, hubris, i.e., unwarranted over-confidence regarding an individual's ability to succeed at tasks they plan to undertake (Haynes et al., 2015;Hayward et al., 2006), is likely to be associated with entrepreneurial intention, with its uncertain future tasks, more so than with employment intention since employment typically involves routine supervised tasks offering limited scope and tolerance for one's hubris. ...
... In addition, we include a measure of hubris, meaning excessive self-confidence in the one's ability to gain a successful outcome despite the absence of knowledge and experience that is seemingly necessary for that prediction. Hubris is common in entrepreneurs, particularly among younger individuals (Haynes et al., 2015;Hayward et al., 2006;Poblete, 2022). Finally, we expect that agentic behavioral traits (in both males and females) may synergize with ESE and hubris to support the formation of ENT-intent (or EMP-intent as an intrapreneur). ...
... Hubris is the psychological disposition to be overconfident about one's ability to achieve targets and/or over-optimistic in one's expectations of the magnitude of the rewards associated with those targets (Haynes et al., 2015;Hayward et al., 2006). Prior research has found hubris to be associated with males more than females (particularly younger adult males) and can be traced back to their socially conditioned gender traits (i.e., agenticism). ...
Plain English Summary
Employed parents influence their adolescents to be entrepreneurs! The choice of occupational type by adolescents depends on their parent’s occupational type and socioeconomic status in conjunction with the adolescent’s gender, academic performance, and cognitions relating to entrepreneurial self-efficacy, (ESE) psychological capital, and hubris. Entrepreneur parents provide guidance, role models, and vicarious learning opportunities for their adolescents to build entrepreneurial skills, but entrepreneurial intention also requires high perceived desirability of entrepreneurship. Adolescents with entrepreneur parents may witness too closely the hard work, stress, and financial instability of their parents’ business, and prefer employment instead. On the other hand, adolescents with employed parents likely incompletely understand entrepreneurship. We find that working-class and middle-class employed parents, and low academic performance, are strongly associated with the formation of adolescents’ entrepreneurial intention. We also find that ESE, psychological capital, and hubris interact synergistically to cause entrepreneurial intention, while hubris and academic performance are mutually suppressive determinants of entrepreneurial intention. The main implications of this study are that entrepreneurial education in schools will enhance both new venture development and the employment of adolescents by firms that value their entrepreneurial attitudes and skills.
... However, high SE can also lead to overconfidence, which poses risks in performance-tied contracts (Ferrari, 2023;Singh, 2020). Overconfident agents often underestimate risks and resources, overlook their limitations in controlling outcomes, and may make poor decisions (Hayward et al., 2006;Simon et al., 2000). Research by Larkin et al. (2012) shows that overconfidence diminishes the effectiveness of performance-based compensation by increasing psychological costs, logical errors, and potential financial losses (Vancouver et al., 2002). ...
... Findings show that while high SE often correlates with better performance, it can also foster overconfidence, especially in output-based contracts under high performance pressure (Singh, 2020). This overconfidence may lead agents to underestimate risks and engage in risky behaviors, resulting in financial losses (Ferrari, 2023;Hayward et al., 2006). Additionally, high-SE agents may make resource allocation errors due to inflated confidence, as noted by Shane and Stuart (2002), further impacting financial outcomes. ...
... This tendency is pronounced in output-based contracts, where high SE agents may view tasks as less challenging and overlook obstacles, reinforcing a distorted sense of control (Bandura, 1997). This overconfidence, fueled by outcome pressure, often leads agents to take excessive risks, ignore market changes or resource constraints, and selectively focus on favorable information (Hayward et al., 2006;Shane and Stuart, 2002;Simon et al., 2000). Men are also culturally predisposed to greater risk-taking and competitiveness (Harris and Jenkins, 2006). ...
Purpose
This research aims to investigate whether, in a principal–agent relationship, personal characteristics of the agent (seniority, locus of control (LOC), self-efficacy (SE), risk appetite (RA)) have an impact on their performance, on costs for the principal and on organizational justice (distributive justice (DJ) especially) in a sample of insurance brokers.
Design/methodology/approach
The adopted structural equation modeling (SEM) analysis highlights the different role that personal characteristics play in affecting or moderating the agent’s performance. Moreover, the mediation analysis highlights the role played by gender and tenure in moderating the relationship between personal characteristics and work outcomes.
Findings
The findings of this study suggest that an agency relationship is not based only on rational choices made by the principal and agent in their own self-interest, but also by other idiosyncratic factors that influence the outcome of the relationship.
Research limitations/implications
In order to better understand the agent’s behaviour, agency relationship investigation should consider other psychological variables in addition to the traditionally considered risk orientation, uncertainty and information asymmetry.
Practical implications
This study gives specific insights into preventing undesired behaviours, e.g. organizational withdrawal, opportunism, high staff/employee turnover, as advocated by current literature.
Originality/value
By systemically investigating and analysing personal characteristics of the agent such as LOC, agent’s SE and RA, this study provides an original contribution to the knowledge on the determinants of costs and effectiveness in the agency relationship.
... Third, cognitive biases also play an important role in superstitious learning. Certain biases-such as overconfidence (Chen et al., 2018;Hayward et al., 2006) and cognitive fixation (Bayus, 2013)-can alter how individuals interpret and draw inferences from experiences. ...
... It has been suggested that overconfidence shapes how entrepreneurs interpret and respond to different outcomes of their experiences. For example, overconfidence can stimulate entrepreneurs to take excessive risks after success because they may falsely believe that their past successes are indicative of future outcomes (Hayward et al., 2006). Although overconfidence may positively affect some entrepreneurial outcomes, such as new venture creation and innovativeness, poorer venture performance typically follows (Kraft et al., 2022). ...
... Entrepreneurs drew inaccurate inferences about what made their campaigns successful and mistakenly invested effort into ineffective aspects of the campaign rather than improving campaign quality and maintaining their engagement with backers. Meanwhile, they tended to be overconfident and overestimated their capabilities, manifested as setting funding goals beyond their capabilities and exerting less effort on effective campaign management (Hayward et al., 2006;Moore & Cain, 2007;Zhang & Cueto, 2017), resulting in inferior performance in subsequent campaigns. ...
Crowdfunding has become an important fundraising method for entrepreneurs. In this study, we examine the role of successful crowdfunding experiences in serial entrepreneurship. Although serial entrepreneurs are typically more mature and achieve higher success rates, it remains unclear how their successes affect their subsequent crowdfunding performance given the extant literature’s mixed views of crowdfunding experiences. To resolve this tension regarding the effects of crowdfunding success, we integrate insights from the crowdfunding literature with organizational learning theory to propose a research framework with competing hypotheses. On the one hand, the crowdfunding literature suggests a positive effect arising from the signaling of legitimacy and credibility from entrepreneurs’ prior success. On the other hand, organizational learning theory suggests the potential of a superstitious learning effect wherein entrepreneurs erroneously associate success with specific actions that may not contribute to success, thereby resulting in reduced subsequent performance. We further identify several moderators related to both theoretical perspectives. Empirical analysis of 10,795 crowdfunding campaigns from 3,978 serial entrepreneurs on Kickstarter suggests that successful experiences, on average, have a detrimental effect on the performance of subsequent campaigns. The results also suggest that experience relatedness, backing experience, and prior blockbuster success can mitigate this negative effect, whereas goal overshooting accentuates it. Supplementary analysis provides insights into the mechanisms at play, specifically, how the positive and negative aspects of success manifest. This study provides theoretical implications for the crowdfunding literature by addressing the tension inherent to crowdfunding success and offers guidance for crowdfunding entrepreneurs and platform operators.
... For this reason, entrepreneurs take several inappropriate risks (Stewart & Roth, 2001), even when the courses of action they execute are unsuccessful, thus producing an escalation of commitment (Staw, 1981) that is seriously detrimental to them (Brockner, 1992). High growth expectations produce a high optimism that encourages entrepreneurs to embark on challenging projects, which require a high commitment of both financial and personal resources (Hayward et al., 2006). This influences the higher exit rates from the entrepreneurial process (Hopenhayn & Vereshchagina, 2003;Zięba, 2017). ...
... In the same vein, Fuentelsaz et al. (2021), based on the hubris theory of entrepreneurship (Hayward et al., 2006), corroborate that high growth expectations are related to higher entrepreneurial exit rates because high growth expectations could respond to overconfidence and arrogance of entrepreneurs. The hubris theory of entrepreneurship argues that entrepreneurs' overconfidence and arrogance can become negative factors in the decision-making process by relying on biased judgments. ...
... The hubris theory of entrepreneurship argues that entrepreneurs' overconfidence and arrogance can become negative factors in the decision-making process by relying on biased judgments. However, this theory suggests that overconfidence is favourable during the early stages of the entrepreneurial process, as it has a positive effect on the formation of new firms, although it then becomes a negative factor in the subsequent stages (Hayward et al., 2006(Hayward et al., , 2010. Therefore, entrepreneurs who tend to overestimate their capabilities and skills (Cassar, 2010;Mueller & Shepherd, 2016) will be more likely to abandon the entrepreneurial process (Poblete, 2022) after the creation of a new firm. ...
New venture creation is a long and complex process that requires significant personal effort. In this study, we analyse how high growth expectations influence new venture creation in nascent entrepreneurs. In addition, we aim to investigate the impact of competitive innovation on new venture creation through the mechanism established between high growth expectations and entrepreneurial effort. Drawing on a sample of 495 nascent entrepreneurs from PSED II, our results show that high growth expectations indirectly influence the creation of a new firm through nascent entrepreneurial effort. Furthermore, the competitive innovation of nascent entrepreneurs exhibits a positive relationship with new venture creation, facilitated by the relationship between high growth expectations and entrepreneurial effort. These results contribute to a better understanding of the role that high growth expectations play in the nascent entrepreneurial process and how competitive innovation and growth expectations explain the creation of a new firm.
... Entrepreneurial persistence represents a pertinent topic in mainstream entrepreneurship research. Authors have studied this notion on the bases of entrepreneurs' attributes (Baum and Locke, 2004;Caliendo et al., 2014;Freeland and Keister, 2016;Patel and Thatcher, 2014), environmental factors (Haines and Townsend, 2014;Hayward et al., 2006;Mujtaba et al., 2021;Steel and Konig, 2006;Welter and Smallbone, 2011), and psychological dimensions (Benjamin and Hess, 2011;Chen et al., 2021;Elhakim, 2022;Van Scotter and Garg, 2019;Silla, 2020). Despite these efforts, several knowledge gaps call for further attention. ...
... As a critical personal trait among entrepreneurs, persistence has long been deemed contingent on characteristics such as personality (Baum and Locke, 2004;Caliendo et al., 2014;Markman et al., 2005;Patel and Thatcher, 2014;Van Scotter and Garg, 2019) as well as skills and knowledge (Freeland and Keister, 2016). Some researchers have assumed an environmental perspective in determining that entrepreneurial persistence is also bound to attributes such as the institutional environment (Hayward et al., 2006;Mujtaba et al., 2021), entrepreneurial adversity (Gong and Yang, 2022;Holland and Shepherd, 2013), professional networks (Mujtaba et al., 2021;Welter and Smallbone, 2011), and social support (Haines and Townsend, 2014;Zhang, 2018). More recent studies from a psychological point of view have concerned the mental aspects of entrepreneurial persistence. ...
Introduction
This study explores how hometown identity of rural tourism entrepreneurs affected entrepreneurial persistence.
Methods
Data from 494 rural tourism entrepreneurs were collected using convenience sampling and analyzed using Amos and SPSS statistical software package via questionnaires distributed to three villages in Guizhou province, China.
Result
The findings reveal that (1) rural tourism entrepreneurs' hometown identity positively affected their attitudes toward entrepreneurial persistence and indirectly influenced entrepreneurial persistence; (2) rural tourism entrepreneurs' hometown identity positively influenced perceived behavioral control and indirectly affected entrepreneurial persistence; (3) rural tourism entrepreneurs' hometown identity positively moderated the role of subjective norms on entrepreneurial persistence.
Discussion
The findings from the present study indicated that rural tourism entrepreneurs' hometown identity can shape entrepreneurial persistence through numerous means. Authorities should emphasize the cultivation of a strong hometown identity among entrepreneurs when formulating and implementing destination-related policies to ensure the sustainable development of rural tourism.
... While centralizing power in a single individual can be an effective solution to collective action problems (Bass and Bass 2008;Yuki and van Fleet 1992), previous research has found that leaders can be unprincipled (Ahlquist and Levi 2011), self-regarding (Arbak and Villeval 2013), overconfident (Hayward et al. 2006), and incompetent (Hogan et al. 1994). When leaders are granted the authority not only to monitor and sanction group members, but also to redistribute wealth through goods and services, it is common for leaders to use their positions of power to extract resources for their own personal gain (Hogan and Kaiser 2005;Hogan et al. 1994). ...
... Prior research shows that designating a single group leader to monitor and sanction group members promotes social order in a variety of ways (Grossman and Baldassarri 2012;Baldassarri and Grossman 2011;Harrell 2018Harrell , 2019Harrell and Simpson 2016). But, there are downsides to leadership (Ahlquist and Levi 2011; Arbak and Villeval 2013;Hayward et al. 2006;Hogan et al. 1994). When leaders are granted the authority to redistribute wealth through goods and services, it is common for leaders to use their positions of power to extract resources for their own personal gain (Bendahan et al. 2015;Berger et al. 2020). ...
Leaders are a part of virtually every group and organization, and while they help solve the various collective action problems that groups face, they can also be unprincipled and incompetent, pursuing their own interests over those of the group. What types of circumstances foster prosocial leadership and motivate leaders to pursue group interests? In a modified dictator game (N = 798), we examine the effects of piece-rate subsidies (or pay per unit of work performed) and the relative price of giving (or the size of the benefit to others for giving) on prosocial behaviour and norms about giving. We find that subsidies increase giving by leaders, that the relative price of giving is unrelated to prosocial behaviour, and that neither affects norms about giving. Furthermore, the introduction and removal of a subsidy do not undermine giving over time. Our results imply that subsidies increase group welfare by motivating leaders to allocate a larger share of resources to group members.
... While entrepreneurs could foresee anticipated difficulties when envisioning the future, unanticipated difficulties arise because felicitous conditions for the implementation of early projections do not emerge (Garud et al., 2014) given residual uncertainties across markets, technologies, and institutions (Andries, Debackere, & van Looy, 2013;McDonald & Eisenhardt, 2020). Furthermore, the presence of bold forecasts that entrepreneurs make during start-up (Kahneman & Lovallo, 1993), which has been explored through the notion of overconfidence (Hayward, Shepherd, & Griffin, 2006) and unbounded claims (Murray & Fisher, 2023), can make it more likely that a gap emerges. The bolder the forecasts entrepreneurs offer early on, the more difficult is it for them to accomplish what they had proposed later (Kahneman & Lovallo, 1993). ...
... A related contribution is to the literature on entrepreneurial framing around disruption (Kumaraswamy, Garud, & Ansari, 2018;Snihur et al., 2018) or revolutionary change (Suddaby et al., 2023). While it is known that overconfident entrepreneurs who make bold forecasts can attract resources (Hayward et al., 2006;Murray & Fisher, 2023), the associated risks remain underappreciated. Our process model suggests that, the bolder the forecasts by overconfident entrepreneurs during start-up (conditional on audience acceptance), the greater the possibility that they will encounter difficulties during implementation. ...
... suggests that people with high confidence tend to have a strong internal locus of control and a self-attribution bias, leading to the belief that outcomes are determined by their behavior (Billett & Qian, 2008;Hirshleifer, 2001). As such, members of hubristic organizations will underestimate their need for resources and support from outsiders because they believe they are responsible for their own success Hayward et al., 2006;Li & Tang, 2010). Second, due to their exaggerated pride and confidence in the organization, members will tend to view their private information as more accurate and ignore external advice Hayward et al., 2006). ...
... As such, members of hubristic organizations will underestimate their need for resources and support from outsiders because they believe they are responsible for their own success Hayward et al., 2006;Li & Tang, 2010). Second, due to their exaggerated pride and confidence in the organization, members will tend to view their private information as more accurate and ignore external advice Hayward et al., 2006). Hubristic organizations are also likely to overestimate customer loyalty and the perceived value customers place in their products or services . ...
Research Summary
Although research has explored how executive hubris shapes organizational actions, we theorize that hubris can also develop outside the executive suite. We introduce the construct organizational hubris , which we define as a durable, collective attitude marked by exaggerated pride and confidence in the organization. Organizational hubris differs from executive hubris in terms of level (individual versus collective) and target (self‐focused vs. organization‐focused). We argue that organizational hubris can develop among high‐identification organizations via an external route (positive external attributions) or an internal route (charismatic messaging from top leaders), or both. Once developed, organizational hubris affects important outcomes by shaping (1) how external stakeholders perceive the organization, (2) how insiders treat external stakeholders, and (3) the relationship among internal stakeholders—particularly between employees and top managers.
Managerial Summary
Among the many stories of corporate excess, some organizations exhibit a sense of superiority—the view that success is inevitable and failure impossible—that can shape their very nature. In this article, we depart from the idea that hubris is confined to the C‐suite and introduce the construct organizational hubris , which we define as a durable, collective attitude marked by exaggerated pride and confidence in the organization. Organizational hubris can develop from positive external attributions and/or charismatic messaging from top leaders. Once developed, organizational hubris affects important strategic outcomes by shaping (1) how external stakeholders perceive the organization, (2) how insiders treat external stakeholders, and (3) the relationship among internal stakeholders—particularly between employees and top managers.
... Experiential learning is firm-specific knowledge that is difficult to imitate, allowing firms to develop organizational capabilities and overcome obstacles to foreign market entry ). However, they may become complacent and overly confident in their understanding of the local culture based on past experiences in the region (Hayward et al., 2006). This can result in misinterpretations and misunderstandings that hinder investment decisions. ...
This study investigates the impact of formal and informal institutional differences on the investment decisions of international joint venture (JV) sponsors of multinational enterprises (MNEs) engaged in liquefied natural gas (LNG) projects. Although this study is anchored in institutional theory, an economic geography approach is supported to understand the direct effects of distance and the interaction effects of various contextual factors. Multiple regression analysis reveals that the institutional and cultural distance between the JV sponsor and host country significantly affects the JV sponsor's investment decisions. Conversely, the geographic, institutional, and cultural distances between JV sponsors have no statistically significant impact on investment decisions. These findings highlight the important role of collaboration between the host and JV sponsors, suggesting that collaborative synergies among JV sponsors may mitigate the effect of distance. Our findings make a theoretical contribution by filling a research gap on how the distance paradigm shapes MNEs' investment strategy decisions and provide valuable insights for international business practitioners. Meanwhile , the difficulty of eliminating the subjectivity arising from measuring institutional differences limits this study. Therefore, future research should increase the reliability of results by triangulating from multiple data sources.
... tand,asaresult,distinguishfourconceptionsofentrepreneurialfailureaccordingtotheorganization al or individual level of analysis and the objective or subjective nature of thecriterion used to identify the situation of failure. For example, solvency is used as an objectivecriterion at the organizational level (Shepherd et al. 2006), while entrepreneurs' assessment oftheir company's performance at exit is used as a subjective criterion (Head 2003). If theentrepreneur feels that his company's performance is below expectations, it is considered afailure,despitethefact that itis agoingconcern. ...
Entrepreneurial failure is a multidimensional phenomenon that calls on several levels of analysis, making it difficult to understand. Among the different types of business, start-ups are the most affected, mainly because of their newness and small size. For a long time, failure factors were analyzed from a singular, voluntarist or deterministic perspective. However, it has been suggested that a different approach be adopted, in an attempt to reconcile the two perspectives. In this study, we seek to identify the factors that have the greatest impact on entrepreneurial failure in start-ups, using a holistic approach. Empirically, our study involved 72 entrepreneurs who had experienced failure. The data collected were analyzed in two stages: exploratory factor analysis and structural equation modeling. At the end of this study, we obtained several results. Firstly, we found that the failure of start-ups can be explained by four key factors, each with a different impact: lack of entrepreneurial support, market access difficulties, financing policy failures and strategic mismanagement. Our study then produced an adjusted structural model that provides a better representation of the phenomenon under study. Résumé :L'échec entrepreneurial est un phénomène multidimensionnel qui fait appel à plusieurs niveaux d'analyserendant sa compréhension compliquée. Parmi les différents types d'entreprises, celles en phase de démarrage sont les plus touchées. Pendant longtemps, l'analyse des facteurs d'échec a été faite suivant une approche singulière en adoptant une perspective volontariste ou déterministe. Toutefois, il est suggéré de procéder autrement en tentant de concilier entre les deux perspectives. Ainsi, nous cherchons à travers cette étude, de soulever les facteurs qui impactent le plus l'échec entrepreneurial des entreprises en phase de démarrage suivant une approche holistique. Sur le plan empirique, notre étude a porté sur 72 entrepreneurs ayant vécu des situations d'échec. Les données collectées ont été analysées en deux temps : l'analyse factorielle exploratoire et la modélisation par les équations structurelle. À l'issue de cette étude, nous avons obtenu plusieurs résultats. Il s'est avéré, tout d'abord, que l'échec des entreprises en phase de démarrage s'explique par quatre facteurs essentiels exerçant des effets d'ampleurs différents à savoir : le manque d'accompagnement entrepreneurial, les difficultés d'accès au marché, la défaillance de la politique de financement et la mauvaise gestion stratégique. Notre étude a permis, ensuite, d'avoir un modèle structurel ajusté qui permet d'assurer une meilleure représentation du phénomène étudié. Mots clés :échec entrepreneurial,startup, handicap de nouveauté, handicap de petitesse
... Also, in this case, contingent on the opportunity cost, decisions may change partly independent of the project's estimated value. Moreover, the threshold value might incorporate other elements and other information that cannot be articulated (Dimov, 2010;Hayward et al., 2006;Belenzon et al., 2017). ...
We illustrate the scientific approach to entrepreneurial decision-making, which is an approach that begins with formulating problems clearly, developing theories about the implications of actions, and testing these theories using existing data or data drawn from well-defined experimental designs. After describing the mechanism through which the scientific approach to entrepreneurial decision-making operates, that is a more effective process of to form, test, and update beliefs about the worth of entrepreneurial ideas, we elaborate on the effects of the scientific approach on three key entrepreneurial outcomes: idea termination, pivoting, and performance. We then refer to the emerging theoretical, empirical, and practitioner-oriented literature on the scientific approach to decision-making, articulating its potential developments. We discuss the potential benefits and challenges of applying the scientific approach to the Chinese entrepreneurial context.
... In a seminal study, Hayward, Shepherd, and Griffin (2006) conducted research in Australia on emotional resilience as a determinant of entrepreneurial persistence, with a specific focus on failure recovery. The study's objective was to understand how entrepreneurs emotionally process failure and how this impacts their ability to continue pursuing entrepreneurial endeavors. ...
This research investigates the psychological and cognitive traits critical to developing an entrepreneurial mindset, aiming to discern the factors that contribute to success or failure among entrepreneurs. Using a mixed-methods approach, qualitative interviews with entrepreneurs and quantitative surveys assessing attributes like resilience and risk tolerance were conducted. Key findings reveal a significant positive correlation between resilience (r = 0.62) and risk tolerance (r = 0.65) and entrepreneurial success, while chi-square analysis (χ² = 15.74, p < 0.05) indicates a preference for intuitive and opportunistic decision-making among successful entrepreneurs. The study concludes that structured educational interventions, especially those focused on resilience and risk management, effectively enhance these traits, preparing entrepreneurs to navigate challenges more adeptly. Recommendations include incorporating resilience training, fostering risk management skills, and promoting opportunistic decision-making techniques within educational programs.
... Second, hubristic managers have adaptive self-confidence based on real skills and achievements, making them more inclined to genuinely reinforce their CSR commitment and exhibit more ethical behavior by decreasing EM. Third, a hubristic leader possesses a bold and ambitious vision, inspiring the staff to achieve high goals by promoting a long-term vision focused on sustainability rather than short-term financial gain (Hayward et al., 2006). This can discourage EM to the detriment of long-term CSR. ...
The debate surrounding the influence of corporate social responsibility (CSR) on earnings management (EM) remains inconclusive, featuring two opposing perspectives. The opportunistic viewpoint suggests that CEOs use CSR as a tool for manipulating earnings, employing it as a strategic shield to conceal opportunistic behavior. Conversely, the ethical viewpoint posits that CSR aims to cultivate trust with stakeholders, promoting long‐term performance while avoiding EM. This paper aims to address this question by considering the role of psychological traits. Specifically, we examine the relationship between CSR and EM and investigate whether psychological traits moderate this relationship. Using a sample of 318 firms from the S&P 500 index from 2015 to 2019, the results show that CSR has a positive impact on EM, indicating that CSR creates more favorable conditions for EM and supporting the opportunistic behavior hypothesis. Furthermore, CEO narcissism moderates the relationship between CSR and EM, influencing an increase in income. Finally, CEO hubris positively moderates the relationship between CSR and both the absolute value of discretionary accruals and positive discretionary accruals. Our findings lead us to the conclusion that narcissistic or hubristic CEOs reinforce the opportunistic behavior hypothesis.
... No cenário americano, a principal causa mortis foi o timing, ou seja, empresas lançadas antes ou depois do momento adequado. Por outro lado, Seshadri (2007) vincula o fracasso da startup às dissonâncias entre os objetivos corporativos e os objetivos de seus fundadores, enquanto Hayward et al. (2006) apresentaram o fracasso como resultado do excesso de confiança e arrogância dos empresários. Em contraste, Ottesen e Grønhaug (2005), DRd -Desenvolvimento Regional em debate (ISSNe 2237-9029) v. 14, p. 867-885, 2024. ...
A contribuição das startups é reconhecida, apesar de uma estratégia de alto risco, mas alta recompensa, com significativa taxa de fracassos e uma baixa proporção de sucesso. O objetivo desta pesquisa é analisar os fatores que levam o indivíduo a não ter sucesso na criação de startups localizadas na cidade de Florianópolis (SC). A metodologia utilizou a análise de conteúdo de 14 entrevistas analisada pelo Python. Os resultados apontam que as startups da região falham porque houve ausência no planejamento a longo prazo, não se adaptaram às mudanças do mercado, ocorreram problemas entre os sócios, enfrentaram a falta de recursos e os empreendedores não levaram em conta as reais necessidades do mercado, testando e adequando o seu projeto junto à comunidade e consequentemente, não ofereceram o produto/serviço e atendimento adequados ao cliente. Palavras-chave: empreendedores; startups; insucesso.
... In addition to the Hubris theory of entrepreneurship, there are other theoretical frameworks that have been proposed to explain the behaviour and decision-making of entrepreneurs. HTE (Hayward et al., 2006) is an extremely significant theory explaining the reason certain businessmen are especially susceptible to starting up fresh businesses under a high probability of business failure. The concept of confidence as a socially constructed phenomenon is a central focus of HTE, as posited by Bollaert and Petit (2010). ...
Article Info Abstract Article History The main goal is to examine the relationship between entrepreneur narcissism and SMEs performance. Although existing research examines mediating relationships between them in terms of hubristic behavior, we adopt a different approach by examining their differences in relation to the employee and leadership. Using management theories and literature, current research revealed how entrepreneurs' personalities and behavior influence SMEs' performance and act as a strong bridge between them. The study collected data from 255 employees working in various SMEs across Punjab-Pakistan and provided data to their managers/owners. For data analysis, a self-administered questionnaire was used. The outcome is interpreted using a measurement model and regression analysis. Recent findings backed up the theoretical hypothesis.
... Overconfident CEOs in such environments are aware of their firm's market position. Following Hayward et al. (2006), who state that overconfidence manifests in "decisions about which opportunities to pursue" (p.163), we argue that overconfident CEOs tend to foster DO activities because they overestimate their endeavors' success. In an external environment that allows riskier decisions, the level of CEOs' overestimation is likely to be substantial (Malmendier & Tate, 2005). ...
... tand,asaresult,distinguishfourconceptionsofentrepreneurialfailureaccordingtotheorganization al or individual level of analysis and the objective or subjective nature of thecriterion used to identify the situation of failure. For example, solvency is used as an objectivecriterion at the organizational level (Shepherd et al. 2006), while entrepreneurs' assessment oftheir company's performance at exit is used as a subjective criterion (Head 2003). If theentrepreneur feels that his company's performance is below expectations, it is considered afailure,despitethefact that itis agoingconcern. ...
Entrepreneurial failure is a multidimensional phenomenon that calls on several levels of analysis, making it difficult to understand. Among the different types of business, start-ups are the most affected, mainly because of their newness and small size. For a long time, failure factors were analyzed from a singular, voluntarist or deterministic perspective. However, it has been suggested that a different approach be adopted, in an attempt to reconcile the two perspectives. In this study, we seek to identify the factors that have the greatest impact on entrepreneurial failure in start-ups, using a holistic approach. Empirically, our study involved 72 entrepreneurs who had experienced failure. The data collected were analyzed in two stages: exploratory factor analysis and structural equation modeling. At the end of this study, we obtained several results. Firstly, we found that the failure of start-ups can be explained by four key factors, each with a different impact: lack of entrepreneurial support, market access difficulties, financing policy failures and strategic mismanagement. Our study then produced an adjusted structural model that provides a better representation of the phenomenon under study.
... The notion of entrepreneurial biases has been developed in a number of important papers on, for example, overconfidence and overoptimism(Cassar, 2010; Cieślik et al., 2018;Hayward et al., 2006;Köllinger et al., 2007;Liu and Cowling, 2023;Lowe and Ziedonis, 2006;Zhang and Cueto, 2017). ...
... As a result, they are better at defining current and future tasks consistent with their current knowledge, skills, and abilities (Hacker, 2003). Moreover, it protects them from hubris, which refers to the combination of overconfidence and excessive optimism (Hayward et al., 2006). Metacognition is a skill that is crucial for mental simulations -creating a mental image of the result of future actions. ...
... Consistent with the 2022 Employment Report of College Students in China, more than half of the undergraduates who preferred to commence business after graduation in 2018 decided to quit their businesses within three years, and the graduates' proportion (41.5%) that opted not to quit, is further reduced than the same period in 2017 (43.4%); additionally, 60% of the vocational institute's graduates who initiated their businesses, chose to quit within three years, whereas the graduate's proportion (39.5%) that decided to continue their businesses is further lowered as compared to the same period in 2017 (41.0%). On one hand, entrepreneurial failure can be attributed to factors such as entrepreneurs ' overconfidence [6], insufficient entrepreneurial resources, absence of a supportive system [11], and limited entrepreneurial experience [26]. On the other hand, the aforementioned statistical data not only indicate that the failure rate of college students' entrepreneurship is high in China but also confirm the result of the separation of entrepreneurship failure education (EFE) and entrepreneurship practice [44,41,49], thus putting forward higher needs for entrepreneurship education in universities and colleges. ...
Entrepreneurial failure education aims to equip entrepreneurs with the knowledge and skills necessary to navigate entrepreneurial setbacks and enhance their ability to manage failure effectively. The evaluation system of EFE is a crucial tool to estimate the development of entrepreneurial failure education (EFE) in universities and colleges, which ensures the high-quality development of EFE in universities and colleges. Based on the concept of EFE in universities and colleges, we built an evaluation index system of entrepreneurship education in universities and colleges in the context of the CIPP model. In addition, an evaluation model of EFE in colleges and universities was constructed by employing the fuzzy comprehensive evaluation (FCE) and analytic hierarchy process (AHP) technique. Moreover, the sample data from five universities in Hebei, Shanxi, and Jiangsu were chosen for evaluation research. The findings indicated that the EFE in higher education institutes was typically in an "average" state; the status of context, input, process, and product were relatively "strong", "very weak", "average", and "relatively weak". Thus, universities and colleges must strengthen the management ability of entrepreneurial failure, support the development of teachers, enhance the cultivation of entrepreneurial practice ability, construct the curriculum system of EFE in universities and colleges, and execute the implementation of entrepreneurial policies. This study provides an effective evaluation tool for EFE in colleges and universities and an essential reference for the quality of EFE in colleges and universities.
... The notion of entrepreneurial biases has been developed in a number of important papers on, for example, overconfidence and overoptimism(Cassar, 2010; Cieślik et al., 2018;Hayward et al., 2006;Köllinger et al., 2007;Liu and Cowling, 2023;Lowe and Ziedonis, 2006;Zhang and Cueto, 2017). ...
Comparative international entrepreneurship research has often used measures of high-growth expectations entrepreneurship to proxy for the construct of high-impact entrepreneurship. We revisit this practice by assessing the cross-country association between high-growth expectations and realized high-impact entrepreneurship to speak to construct measurement fit. We find that expectations are not a good proxy for realizations; they are associated with different determinants and outcomes, respectively. We go on to introduce the notion of entrepreneurial projection bias to gauge the misfit between expectations and realizations. Conditioning on entrepreneurial projection bias partially restores the association between realized high-impact entrepreneurship and its determinants (or outcomes) when realizations are proxied using expectations. Furthermore, we show that opportunity-motivated entrepreneurship also does not proxy well for high-impact entrepreneurship. Our analysis brings into question current survey-based approaches to measuring high-impact entrepreneurship and existing rankings of countries’ entrepreneurial performance, with important implications for entrepreneurship theory and policy.
... Some level of overconfidence can be beneficial for entrepreneurs working through the early stages of a startup opportunity. However, it can also lead to an overestimation of one's personal agentic capabilities likely leading to managerial hubris and undesirable venture outcomes (Hayward et al., 2006). Humility can also positively impact the development of emotional and social competencies (Hendijani and Sohrabi, 2019;Sanchez et al., 2024). ...
Uncertainty permeates the world of entrepreneurship. Yet, understanding how entrepreneurs perceive and make decisions in the face of uncertainty remains elusive. The value of Bayesian decision models with their probabilistic-based assumptions is only of limited help to entrepreneurs in solving the problem of uncertainty. This research extends the utility of non-probabilistic modes of entrepreneurial cognition as a supplementary epistemology for shedding light into the ‘black box’ of how entrepreneurs navigate unknowable futures. We conceptualize core insights, on how decision-makers make sense of, interpret, and act amidst life's deep uncertainties. Specifically, we introduce four decision heuristics entrepreneurs adopt—grounded in the shared foundations in broader conceptions of uncertainty from the psychology of religious faith—that help systematize why (a) intuitive insight, (b) generative doubt, (c) redemptive choice, and (d) transcendent faith, enhance our understanding of how elements of uncertainty throughout the venture development journey are often addressed. Implications for future research are discussed.
... The earliest business research in this area can be traced to behavioral finance researchers' studies of CEO hubris in merger and acquisition (M&A) decisions (Roll, 1986). Management researchers have extended the study of hubris into mainstream management and organization studies (for example, Hayward, 2007;Petit & Bollaert, 2012;Picone et al., 2014;Tourish, 2020), strategic management (Li & Tang, 2010), business ethics (McManus, 2018), environmental mismanagement (Zhang et al., 2020), collective (organizational) hubris (Ladd, 2012), entrepreneurship (Haynes, Hitt, & Campbell, 2015;Hayward, Shepherd, & Griffin, 2006), corporate governance (Park et al., 2018) and leadership studies (Sadler-Smith, 2019;Sadler-Smith et al., 2018). ...
Purpose: This paper examines macroeconomic factors affecting insolvency level in the UK construction industry.
Design/methodology/approach: A Lagged Dependent Variable (LDV) model is proposed which adequately addressed the serial
correlation and endogeneity problems commonly existed in time series data. Objective macroeconomic data from Q3 1997 to Q4 2023 are used to evaluate seven refutable hypotheses.
Findings: It is found that higher unemployment rate or annual interest burden leads to higher the number of insolvencies, while higher construction output value, or interest rate leads to lower insolvencies.Domino effect in construction insolvency is also confirmed.
Research limitations/implications: The proposed solutions to the missing data on 3 quarters and the changes in the industry breakdown methods during the study period might have affected the accuracy and consistency of data.
Practical implications: The paper provides objective insights to factors affecting construction insolvency, offering tools for future policy formulation.
Social implications: Knowing factors affecting insolvencies helps formulating solutions.
Originality/value: Previous studies on insolvency in construction industry have largely focused on prediction of insolvency of individual companies using firm level financial data, which are symptoms of failure rather than root causes. Studies using questionnaires could be subjective and the limited studies using macroeconomic factors often have methodological issues. This paper bridges the gap by analysing objective macroeconomic data with a sound methodology.
Startups are slowly becoming a lead player in fostering economic prosperity of a nation. Despite its prominence in socio-economic systems, it is confronted with numerous challenges like lack of funds, expertise, mentoring and many more making them vulnerable and putting their survival at risk. Literature provides enough evidence that incorporation of social media strategy in the overall business strategy is beneficial for multinational businesses. However, limited studies have been found that deals with social media in the context of startups especially that are incubated in Business Incubators (BIs). A study has been carried out to address this gap by exploring the use of social media by 65 startups that are incubated in four BIs of Assam, the economically most developed state of north-east India. A total of 2795 social media posts have been identified from the verified profiles maintained by the startups on four popular social networking sites - Facebook, Instagram, Twitter and LinkedIn. Data were collected on different social media metrics for a period of 3 months (91 days) and were analyzed that led to some interesting insights. This study has put up recommendations based on the analysis that may be implemented by the startups in formulating their social media strategy.
In this chapter, we extend the reflections made in the first edition of this book on the nature of the Global Financial Crisis (GFC) of 2008, by including further observations on the consequences of the Covid-19 crisis and of the Ukraine war up to the deflagration of Israeli-Hamas crisis in October 2023. Observations lead to acknowledge a change of nature in the current crisis time: from cyclical crisis made of short-term critical events, largely analyzed by management literature, to what we called “never ending crisis”, where crisis is intense, global, and lengthy. The overall impact of the change of nature of crisis on Boards is manifold. First, short termism exacerbates since an enduring crisis stimulates quick, almost immediate, reactions. Boards are therefore called for reacting fast. Second, centralization remains a common reaction to uncertainties, but if the crisis is lengthy the negative consequences of centralization emerge in terms of organizational effectiveness. Therefore, Boards get more careful about the adoption of centralization in the long run. Third, the never-ending crisis encourages parochial attitudes in the Boards given the ongoing uncertainty about business results. By being intense, global, and lengthy, current crisis envisages a deep transformation of society whose direction is not yet clear. The crisis persists delaying the arrival of any foreseeable future. In such a context, short-termism and parochialism seem to characterize even more the Boardroom since Boards cannot see the end of crisis. In conclusion, the change of nature of the current crisis seems to be detrimental to the decision-making process at the Board level: the more intense, global, and lengthy the crisis is, the less effective the decision-making process may become.
Purpose
This study investigates the role of mindfulness in the relationship between entrepreneurial intention and behavior.
Design/methodology/approach
To investigate the effect of mindfulness on entrepreneurial intention and behavior, we adopt a conceptual framework based on the theory of planned behavior and develop our hypothesis, anticipating that mindfulness has a moderating effect on the entrepreneurial intention–behavior relationship. We conduct an empirical study by administering a survey questionnaire with 329 respondents who attended a training program organized by one of the leading management institutes in India.
Findings
We find a positive effect of entrepreneurial intention and mindfulness on entrepreneurial behavior. Further, mindfulness has a moderating effect on the entrepreneurial intention–behavior relationship.
Research limitations/implications
The study has a few limitations. It was conducted among unemployed youth who participated in a government-sponsored training program for the promotion of entrepreneurship. Although not all the participants in the program were automatically eligible for government funding for starting a business, their entrepreneurial intention–behavior relationship may vary based on their conditions after the training concluded. This study emphasizes only the relationship between mindfulness and entrepreneurial intention behavior, considering EI and well-being implicit in mindfulness. Other contingent factors might also influence the entrepreneurship intention–behavior relationship, but our argument is that, ultimately, all emotional and rational factors can be subordinated to mindfulness. Hence, future research could be carried out to study the effect of mindfulness practice, entrepreneurial intention and the effectiveness of implementation behavior. Further longitudinal studies could be designed to understand how mindfulness training bridges the gap in the entrepreneurial intention–behavior relationship.
Practical implications
Through this study, we offer empirical evidence on the role of mindfulness in moderating the intention–behavior relationship in entrepreneurship. Mindfulness makes people more aware of their internal and external environment when they pay attention with a purpose that helps them to regulate their emotions, cognition, novelty seeking and social contexts to sustain the ups and downs in starting a business.
Originality/value
The findings of the study offer new insights into the nuanced association between entrepreneurial intention and behavior through the lens of mindfulness.
Opportunity recognition is a distinctive and essential entrepreneurial behaviour and a core concept in entrepreneurship research. However, the mechanisms by which passion influences opportunity recognition, as well as the conditions under which this relationship occurs, are not well understood. This study analyses time-lagged data from 258 entrepreneurs to explore how, when, and which aspects of entrepreneurial passion influence opportunity recognition through entrepreneurial alertness. The results indicate that all three types of entrepreneurial passion—passion for inventing, passion for founding, and passion for developing—enhance opportunity recognition by increasing entrepreneurial alertness. However, only passion for inventing and passion for developing have a direct impact on opportunity recognition. Additionally, passion for inventing and passion for founding boost entrepreneurial alertness, but only in highly dynamic environments. On the other hand, the effect of passion for developing on alertness remains consistent regardless of environmental conditions. Further analysis reveals that each of the three passion domains affects opportunity recognition through different dimensions of entrepreneurial alertness.
Kalasalingam Academy of Research and Education, KARE) по подготовке предпринимателей, их адаптации к предпринимательским экосистемам разного уровня и сложности. Ключевые слова: предпринимательское образование; обучение инновациям; предпринимательское мышление; метакомпетенции; инновационная деятельность; предпринимательская экосистема; создание венчурных предприятий; риски; выявление возможностей Цитирование: John-Samuvel D., Szymański J.R., Żurek-Mortka M., Sathiyanarayanan M. (2024) Building Human Capabilities for an Increasingly Complex Entrepreneurial Ecosystem.
Kalasalingam Academy of Research and Education, KARE) по подготовке предпринимателей, их адаптации к предпринимательским экосистемам разного уровня и сложности. Ключевые слова: предпринимательское образование; обучение инновациям; предпринимательское мышление; метакомпетенции; инновационная деятельность; предпринимательская экосистема; создание венчурных предприятий; риски; выявление возможностей Цитирование: John-Samuvel D., Szymański J.R., Żurek-Mortka M., Sathiyanarayanan M. (2024) Building Human Capabilities for an Increasingly Complex Entrepreneurial Ecosystem.
Empirical evidence supports the conventional wisdom that entrepreneurs are more optimistic and overconfident than others. However, the same holds true for (top) managers. In a large incentivized survey (), we directly compare entrepreneurs, managers, and employees on a comprehensive set of measures of optimism and overconfidence. We find that on average entrepreneurs and managers are more optimistic than employees in their dispositional optimism and their explanatory style of past events. However, they do not differ from each other in these respects. For two incentivized measures of overconfidence, we also find no differences between entrepreneurs and managers. Both are equally likely to overestimate their own abilities compared to employees. In terms of overestimating general economic prospects differences with employees are much less pronounced. Exploration of within‐group heterogeneities shows that these observations hold true for various subgroups of entrepreneurs and managers. Together these findings tentatively suggest that optimism and overconfidence characterize strategic decision makers more generally, irrespective of whether they bear the full risk of their strategic decisions.
Girişimcilik ile ilgili süreçlerin ve girişimcilerin kendilerinin genel olarak yenilik ve başarı yaratma potansiyelleri ile övülmesine yönelik başarı hikayelerinin anlatılması çok yaygın olsa da, girişimciliğe dair sürecin ayrılmaz bir parçası olan zorluklar ve bu zorlukların kaçınılmaz bir parçası olan başarısızlık konusu çoğunlukla göz ardı edilmektedir. Oysa başarısızlığa yol açan faktörlerin anlaşılması girişimcilerin bunlardan öğrenerek başarılı olma olasılıklarını artırabilecektir. Bu çalışmada yazında başarısızlık kavramına odaklanan çalışmaların derlemesi yapılarak başarısızlığa neden olan faktörlerle ilgili sınıflandırma yapılmıştır. Ayrıca çalışmanın son kısmında, başarısızlıkla başa çıkma süreçlerinde yapıcı öğrenmenin gerçekleşmesinin ortaya çıkaracağı olumlu sonuçlar ile ilgili önermeler geliştirilmiştir.
Purpose
This paper aims to explore how narcissistic traits and personality influence entrepreneurial behaviour. In entrepreneurship and psychology, research has shown that narcissism and personality have “productive” and “unproductive” influences on entrepreneurial activities. Therefore, this paper explores the entrepreneur from a social constructionist perspective by using the narrative from the emerging literature. The narrative focus is on narcissism, entrepreneurial personality and the intention to start a new venture, focusing on activities in the early stages of entrepreneurship.
Design/methodology/approach
This study draws upon the narcissism theory and the big five personality models. Using the conceptual model, the authors identify commonalities with entrepreneurial activities such as product and service development, market competitive strategies, marketing, networking, performance management, learning from failure and fund-raising activities. The conceptual framework demonstrates a connection between narcissism, the big five personality and entrepreneurial activities.
Findings
This study proposes an innovative conceptual framework for productive entrepreneurial behaviour. Productive traits of the grandiose narcissist are extraversion and openness to experience, which may have positive influences on the entrepreneurship process. Traits such as assertiveness, overconfidence and intellect have been found to be instrumental in resource acquisition activities. Findings also suggest that the grandiose narcissist will be high in openness to experience (intellect) and extraversion (excitement and social networking). The narcissist is most likely to choose an internal source of funding to protect their fragile ego and maintain control over their entities. Those with high extraversion and openness to experience may be more open to pursuing external sources of funding, as they are more inclined to have social networks and enjoy the external process. Though the study focuses on the “dark trait productivity” of narcissism, it is important not to overlook the damaging side of the narcissistic entrepreneur – “dark trait unproductivity”. The study also discusses the unproductive traits of narcissistic entrepreneurs, such as constantly chasing goals, deflecting and blaming the environment and others for failure, embarking on risky financial decisions, a lack of empathy in team dynamics and poor stakeholder management.
Originality/value
The influence of narcissism on entrepreneurial activities and its impact have gained traction among academia and practitioners. Yet, this is an insufficiently understood area of study and has not been explored in depth. Previous research has focused chiefly on entrepreneurial intentions in the context of entrepreneurship, and what influences the choice to start a business. There is limited research that bridges the gap between entrepreneurial finance and psychology–narcissism personality.
This study explores whether journalists report more positively or negatively on acquisitions by chief executive officers (CEOs) with greater overconfidence than those with less overconfident CEOs. The results show that journalists report acquisition events conducted by firms with overconfident CEOs more negatively than those without. Meanwhile, journalists' negativity in reporting acquisitions by overconfident CEOs is mitigated during periods of high market uncertainty. This result suggests that journalists are not biased upward because of the positive prospects presented by overconfident CEOs but instead act as information intermediaries to inform readers about the overoptimistic view of overconfident CEOs.
The practitioner framework, the Lean Startup, largely based on the experience of Blank (2013), and developed separately from scholarly work, has none-the-less made inroads in the academic literature. In reconciling The Lean Startup framework with entrepreneurship theory, Blank and Eckhardt argue that theory work in entrepreneurship is fragmented. However, this paper argues that these theories may not be as fragmented as implied. Indeed, many theories in entrepreneurship can be grouped into two “families”—one of which is broadly consistent with the model in The Lean Startup, while the other is deeply inconsistent with this model but consistent with an important theory in entrepreneurship: the Creation Theory of Entrepreneurial Opportunities. What this paper shows is that there are important differences that lead to boundary conditions between these two families of theory. More profound, these different approaches to the entrepreneurship process suggest they should be applied in different entrepreneurial settings and at different points in the process. This paper examines the link between the Creation Theory of Entrepreneurship and its associated family of theories and the Lean Startup framework and its associated family of theories, such as Discovery, IO Nexus, The Scientific Method, and so forth. The paper concludes by describing the different contexts under which each family of theories apply and suggests future research that empirically test the boundary conditions of these different theory families.
Drawing on the Attention Base View (ABV) theory, this paper examines the adoption of Proactive Environmental Strategies (PES) by formal firms in emerging economies and explores the influence of informal competition. We investigate the moderating effects of contextual factors (number of formal competitors) and firm characteristics (CEO's experience). Using data from the 2019 World Bank Enterprise Survey, we apply a Negative Binomial model to a sample of 7,436 manufacturing firms across 25 emerging economies. Unlike previous evidence, our findings suggest that formal firms facing competition from informal counterparts tend to adopt PES to bolster competitiveness. However, the perception of high formal competition and the CEO's industry experience may reduce PES adoption. This study advances our understanding of PES adoption in emerging economies, emphasizing the significance of informal competition. It also increases the evidence of the ABV approach to environmental strategy research, offering insights for managing environmental challenges in emerging markets.
Purpose
The purpose of this study is to address why managers enter the excessive market. A comparison of the facts and perceptions of entrants relative to success in the market shows that many entrants are confident about the viability of their businesses and enter the market. Accordingly, the authors simulate market entry decisions to detect behavioral biases.
Design/methodology/approach
The authors adapted the entry decisions simulation method, which is supported by the theoretical foundations of signal detection theory (SDT) and signaling theory. The simulation model is implemented on the Anaconda platform and written in Python 3.
Findings
The results of this study suggest that overestimation relates to excess market entry. Also, the proportion of excess entry under difficult conditions is always higher than under easy conditions.
Practical implications
This research helps managers and firms think about their and their competitors' abilities and evaluate them before entering the market. Policymakers and practitioners can also design programs such as experiential learning to help entrants assess their skills.
Originality/value
So far, no research has investigated the role of overconfidence under different market conditions. Accordingly, this study contributes to the current market entry literature by disentangling the debate between absolute and relative confidence and by considering the role of task difficulty.
Two experiments were conducted to replicate and extend previous findings which indicated that judgment bias about the extent of one's own knowledge can be decreased by a de-biasing technique called counterfactual reasoning, that is, having people consider why their answers to questions may be wrong. The results of the two experiments confirm the effectiveness of this technique to decrease bias, by statistically controlling for important variables. The results extend previous findings about its effectiveness, by showing that counterfactual reasoning (a) reduced bias on knowledge questions about a specific subject area and (b) reduced bias on both hard and easy test questions. In addition, the two experiments establish that bias and test performance are inversely related, and a theoretical connection between this relationship and the ubiquitous hard/easy effect in bias research is offered. The results are discussed in terms of decision-making processes and the potentially detrimental effects of bias on test performance and learning in general.
Ss asked to generate their own hypotheses expressed less confidence that they were true than did other Ss who were presented with the same hypotheses for evaluation. This finding holds across domains varying from prediction and social inference to general knowledge questions. Furthermore, Ss who generated their own hypotheses appeared to be more sensitive to their accuracy than were Ss who evaluated the hypotheses. The results are interpreted as evidence that the hypothesis generation task leads Ss to consider more alternative hypotheses than Ss who are asked to evaluate a prespecified hypothesis. This interpretation is supported by experiments demonstrating that the difference between generation and evaluation disappears if a closed set of alternatives is specified or if a delay is inserted between hypothesis generation and confidence assessment.
This article synthesizes the large but diverse literature on organizational legitimacy, highlighting similarities and disparities among the leading strategic and institutional approaches. The analysis identifies three primary forms of legitimacy: pragmatic, based on audience self-interest; moral, based on normative approval; and cognitive, based on comprehensibility and taken-for-grantedness. The article then examines strategies for gaining, maintaining, and repairing legitimacy of each type, suggesting both the promises and the pitfalls of such instrumental manipulations.
This article contains a theoretical discussion and an empirical test of Stinchcombe's "liability of newness" hypothesis, which assumes higher risks of failure for young organizations compared with old ones. It is shown that this hypothesis is not a good representation of the mortality hazard of West German business organizations. Therefore, we introduce the concept of a "liability of adolescence," which proposes an inverted U-shaped risk pattern. It is shown that mortality, depending on the initial resource endowments of a firm, peaks between one and fifteen years after founding. From this perspective, extended interpretations of the liabilities of smallness and legal form are given. These arguments are well supported by a log-logistic rate model estimated with our data.
In this paper, I attempt to advance the concept of embeddedness beyond the level of a programmatic statement by developing a formulation that specifies how embeddedness and network structure affect economic action. On the basis of existing theory and original ethnographies of 23 apparel firms, I develop a systematic scheme that more fully demarcates the unique features, functions, and sources of embeddedness. From this scheme, I derive a set of refutable implications and test their plausibility, using another data set on the network ties of all better dress apparel firms in the New York apparel economy. Results reveal that embeddedness is an exchange system with unique opportunities relative to markets and that firms organized in networks have higher survival chances than do firms which maintain arm's-length market relationships. The positive effect of embeddedness reaches a threshold, however, after which point the positive effect reverses itself.
The “winner's curse” occurs in competitive situations when a successful buyer finds that he or she has paid too much for a commodity of uncertain value. This study provides an experimental demonstration of the winner's curse, and identifies factors that affect the existence and magnitude of this bidding abnormality. In an auction setting, two factors are shown to affect the incidence and magnitude of the winner's curse: (1) the degree of uncertainty concerning the value of the item up for bid and (2) the number of competing bidders. Increasing either factor will increase the range of value estimates and bids, making it more likely that the winning bidder will overestimate the true value of the commodity and thus overbid.
This is a comparative study of six organizations operating in the same industrial environment. The subsystems (sales, research, and production) in each organization were differentiated from each other in terms of subsystem formal structures, the member's goal orientation, member's time orientations and member's interpersonal orientations. This differentiation was related to the requirements of the particular subenvironment with which each subsystem dealt. A relationship was found between the extent to which the states of differentiation and integration in each organization met the requirements of the environment and the relative economic performance of the organizations. Within each organization the degree of differentiation of behavior and orientation between the various subsystems was found to be inversely related to the degree of integration obtained between these subsystems. Since this environment required that economically high performing organizations be both highly differentiated and well integrated, an investigation was also made into how effective organizations attained both of these antagonistic states. All six organizations had similar integrative devices (integrating teams and departments), but in the high performing organizations the integrative devices more fully met six determinants of effectiveness, which included such factors as the pattern of influence in the organization and the typical mode of behavior used to resolve conflict.
Ss asked to generate their own hypotheses expressed less confidence that they were true than did other Ss who were presented with the same hypotheses for evaluation. This finding holds across domains varying from prediction and social inference to general knowledge questions. Furthermore, Ss who generated their own hypotheses appeared to be more sensitive to their accuracy than were Ss who evaluated the hypotheses. The results are interpreted as evidence that the hypothesis generation task leads Ss to consider more alternative hypotheses than Ss who are asked to evaluate a prespecified hypothesis. This interpretation is supported by experiments demonstrating that the difference between generation and evaluation disappears if a closed set of alternatives is specified or if a delay is inserted between hypothesis generation and confidence assessment. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Tested 3 hypotheses concerning people's predictions of task completion times: (1) people underestimate their own but not others' completion times, (2) people focus on plan-based scenarios rather than on relevant past experiences while generating their predictions, and (3) people's attributions diminish the relevance of past experiences. Five studies were conducted with a total of 465 undergraduates. Results support each hypothesis. Ss' predictions of their completion times were too optimistic for a variety of academic and nonacademic tasks. Think-aloud procedures revealed that Ss focused primarily on future scenarios when predicting their completion times. The optimistic bias was eliminated for Ss instructed to connect relevant past experiences with their predictions. Ss attributed their past prediction failures to external, transient, and specific factors. Observer Ss overestimated others' completion times and made greater use of relevant past experiences. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
The concept of organizational culture has received increasing attention in recent years both from academics and practitioners. This article presents the author's view of how culture should be defined and analyzed if it is to be of use in the field of organizational psychology. Other concepts are reviewed, a brief history is provided, and case materials are presented to illustrate how to analyze culture and how to think about culture change. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Drawing on samples of professional observers of world politics, this article explores the interrelations among cognitive style, theoretical outlook, and reactions to close-call counterfactuals. Study 1 demonstrated that experts (especially high scorers on a composite measure of need for closure and simplicity) rejected close-call counterfactuals that redirected history when these counterfactuals undermined a preferred framework for understanding the past (the "I-was-not-almost-wrong" defense). Study 2 demonstrated that experts (especially high scorers on need for closure and simplicity) embraced close-call counterfactuals that redirected history when these counterfactuals protected conditional forecasts from refutation (the predicted outcome nearly occurred—so "I was almost right"). The article concludes by considering the radically different normative value spins that can be placed on willingness to entertain close-call counterfactuals. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
A total of 130 Ss in 2 experiments within a debriefing paradigm examined the perseverance of social theories. Ss were initially given 2 case studies suggestive of either a positive or a negative relationship between risk taking and success as a firefighter. Some Ss were asked to provide a written explanation of the relationship; others were not. Experimental Ss were thoroughly debriefed concerning the fictitious nature of the initial case studies; some Ss were not debriefed. Subsequent assessments of Ss' personal beliefs about the relationship indicated that even when initially based on weak data, social theories can survive the total discrediting of that initial evidential base. Correlational and experimental results suggest that such unwarranted theory perseverance may be mediated, in part, by the cognitive process of formulating causal scenarios or explanations. Normative issues and the cognitive processes underlying perseverance are examined, and possible techniques for overcoming unwarranted theory perseverance are discussed. (20 ref) (PsycINFO Database Record (c) 2012 APA, all rights reserved)
This chapter focuses on the base rate fallacy controversy. The importance of considering base rates before making causal attributions is one that is instilled in all humans in the course of training in experimental methodology. But base rates play an important role in other inferential formats too, especially in Bayesian ones. There is evidence aplenty that in those contexts, they are largely ignored in favor of the diagnostic information at hand. This is the phenomenon known as the “base rate fallacy.” The probability of uncertain outcomes is often judged by the extent to which they represent their source or generating process. The features by which this similarity or representativeness is assessed are not necessarily those that figure in the normative derivation of the requested probability. Kahneman and Tversky derived the prediction that if an event is to be judged vis a vis several alternative possible sources or several alternative possible outcomes, these will be ranked by the similarity between them and the event and the ranking will not be affected by how likely each source or outcome is initially.
Temporal construal theory states that distant future situations are construed on a higher level (i.e., using more abstract and central features) than near future situations. Accordingly, the theory suggests that the value associated with the high-level construal is enhanced over delay and that the value associated with the low-level construal is discounted over delay. In goal-directed activities, desirability of the activity's end state represents a high-level construal, whereas the feasibility of attaining this end state represents a low-level construal. Study 1 found that distant future activities were construed on a higher level than near future activities. Studies 2 and 3 showed that decisions regarding distant future activities, compared with decisions regarding near future activities, were more influenced by the desirability of the end state and less influenced by the feasibility of attaining the end state. Study 4 presented students with a real-life choice of academic assignments varying in difficulty (feasibility) and interest (desirability). In choosing a distant future assignment, students placed relatively more weight on the assignment's interest, whereas in choosing a near future assignment, they placed relatively more weight on difficulty. Study 5 found that distant future plans, compared with near future plans, were related to desirability of activities rather than to time constraints.
Considers structural inertia in organizational populations as an outcome of an ecological-evolutionary process. Structural inertia is considered to be a consequence of selection as opposed to a precondition. The focus of this analysis is on the timing of organizational change. Structural inertia is defined to be a correspondence between a class of organizations and their environments. Reliably producing collective action and accounting rationally for their activities are identified as important organizational competencies. This reliability and accountability are achieved when the organization has the capacity to reproduce structure with high fidelity. Organizations are composed of various hierarchical layers that vary in their ability to respond and change. Organizational goals, forms of authority, core technology, and marketing strategy are the four organizational properties used to classify organizations in the proposed theory. Older organizations are found to have more inertia than younger ones. The effect of size on inertia is more difficult to determine. The variance in inertia with respect to the complexity of organizational arrangements is also explored. (SRD)
Uses human capital theory and organizational ecology to explore the success of newly formed firms. Human capital focuses on the firm's founder and his/her background whereas organizational ecology considers the characteristics of the organization and its environmental conditions. Data used in the analysis were collected from 1,849 firm founders in Germany whose firms were formed in 1985-1986. Variables used were survival time, general and specific human capital of the founder, newness of the firm, initial size, organizational strategies, location, branch of industry, and market conditions. Of the firms considered, almost one-fourth had failed in the first two years, and 37% had failed within five years. The firms with founders who had more work experience and schooling improved their chances of survival. Those businesses that were novel were more likely to survive than those firms that were considered followers. Overall, the results show that all human capital variables considered have strong selection effects. (SRD)
For older and newer firms, larger and smaller, there are strengths and weaknesses related to firm age and size. What may be a strength for one type is often a weakness for another. This analysis brings together the theoretical frameworks of population and organizational ecology and strategic management to examine the liabilities of firm age and size, and strategies each type of firm may use to overcome potential liabilities. The theoretical perspectives each focus on change, but at different levels of analysis – this study seeks to include both population and organizational change. It examines characteristics of older, larger firms and newer, smaller organizations that make change difficult or that cause the firm to face a volatile environment. Strategic implications of the liabilities of age and size are discussed. For smaller firms, for example, partnerships with other organizations can provide access to resources (and stability); for larger firms, partnerships can provide access to new technologies (and revitalization).
Explaining how entrepreneurs overcome information asymmetry between themselves and potential investors to obtain financing is an important issue for entrepreneurship research. Our premise is that economic explanations for venture finance, which do not consider how social ties influence this process, are undersocialized and incomplete. However, we also argue that organization theoretic arguments, which draw on the concept of social obligation, are oversocialized. Drawing on the organizational theory literature, and in-depth fieldwork with 50 high-technology ventures, we examine the effects of direct and indirect ties between entrepreneurs and 202 seed-stage investors on venture finance decisions. We show that these ties influence the selection of ventures to fund through a process of information transfer.
Analogy—recalling familiar past situations to deal with novel ones—is a mental tool that everyone uses. Analogy can provide invaluable creative insights, but it can also lead to dangerous errors. In Mental Leaps two leading cognitive scientists show how analogy works and how it can be used most effectively. Keith Holyoak and Paul Thagard provide a unified, comprehensive account of the diverse operations and applications of analogy, including problem solving, decision making, explanation, and communication.
Holyoak and Thagard present their own theory of analogy, considering its implications for cognitive science in general, and survey examples from many other domains. These include animal cognition, developmental and social psychology, political science, philosophy, history of science, anthropology, and literature.
Understanding how we draw analogies is important for people interested in the evolution of thinking in animals and in children; for those whose focus is on either creative thinking or errors of everyday reasoning; for those concerned with how decisions are made in law, business, and politics; and for those striving to improve education. Mental Leaps covers all of this ground, emphasizing the principles that govern the use of analogy and keeping technical matters to a minimum.
Bradford Books imprint
This study examines variation in top executives' environmental perceptions within firms and within industries. More specifically, we investigate how industry and organizational membership affect top executives' perceptions of five environmental attributes. Result indicate that significant homogeneity of perceptions exists within firms and also within industries. Approximately 40 percent of the variance in individual top-level executives' perceptions of aspects of their respective organization's environment is explained by their organizational and industry membership. Implications of the findings for strategic management and organization theory and for future research are presented. (C) John Wiley & Sons, Ltd.
This article synthesizes the large but diverse literature on organizational legitimacy, highlighting similarities and disparities among the leading strategic and institutional approaches. The analysis identifies three primary forms of legitimacy: pragmatic, based on audience self-interest; moral, based on normative approval: and cognitive, based on comprehensibility and taken-for-grantedness. The article then examines strategies for gaining, maintaining, and repairing legitimacy of each type, suggesting both the promises and the pitfalls of such instrumental manipulations.
The concept of organizational culture has received increasing attention in recent years both from academics and practitioners. This article presents the author's view of how culture should be defined and analyzed if it is to be of use in the field of organizational psychology. Other concepts are reviewed, a brief history is provided, and case materials are presented to illustrate how to analyze culture and how to think about culture change.
This chapter examines social psychological implications of human subjectivity—implications of the fact, and perhaps more importantly the insight, that people are governed not by the passive reception and recognition of some invariant objective reality, but by their own subjective representations and constructions of the events that unfold around them. The history of the subjective-objective distinction, first in some traditional theoretical and methodological concerns of social psychology, and then human motivation are discussed in this chapter. Social cognition, a research area that has held center stage in the field for most of the past two decades is expalined. The particular focus will be the problem of situational construal and its contribution to the difficulties of predicting social actions and making inferences or attributions about social actors. Construal processes are variable and uncertain, and they contribute heavily to the variability and unpredictability of a wide range of social responses. The second and less familiar thesis, social perceivers, fail to recognize, or at least fail to make adequate inferential allowance for, these “vagaries” of construal. People characteristically make attributions and other social judgments, and decisions predicated on a kind of naive realism. The process of subjective construal is fundamental to psychological inquiry at all levels of analysis.
We develop a multiperiod market model describing both the process by which traders learn about their ability and how a bias in this learning can create overconfident traders. A trader in our model initially does not know his own ability. He infers this ability from his successes and failures. In assessing his ability the trader takes too much credit for his successes. This leads him to become overconfident. A trader's expected level of overconfidence increases in the early stages of his career. Then, with more experience, he comes to better recognize his own ability. The patterns in trading volume, expected profits, price volatility, and expected prices resulting from this endogenous overconfidence are analyzed. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
This study examined the impact of agency risks and task uncertainty on venture capitalist-chief executive officer (VC-CEO) interaction. Results from 51 VC-CEO dyads indicate that the frequency of interaction depends on the extent of VC-CEO goal congruence, the degree of the CEO's new venture experience, the venture's stage of development, and the degree of technical innovation it is pursuing. However, contrary to conventional expectations, the degree of management ownership had no impact on the frequency of interaction.
This article reviews the research conducted on organizational size and environments from 1980 through 1992. Specifically, the environmental research based on the traditional environmental contingency model is reviewed and trends over the review period are identified. The organizational size literature is reviewed in a similar fashion. Suggestions for empirical and theoretical extensions of trends identified in both research streams a represented. An especially salient finding in the review is the emerging theoretical convergence of the size and environment research streams on the topic of organizational life cycles, which seems to particularly involve the population ecology model. Possible theoretical convergence between the institutional, population ecology, interorganizational relations, and environmental enactment perspectives and other fundamental organization theory areas (e.g., culture and strategy) are then proposed. Overall, traditional organizational size and environment research continued at a steady pace over the review period, and new approaches and perspectives, especially in the area of environment research, have developed and are surpassing the traditional approaches in the volume of research they generate.
An area of significant importance and risk exposure during an audit of a financial institution is assessing the uncollectible portion of the client's loan portfolio. Auditing the collectibitity of a commercial loan can be difficult because this complex judgment is semi-structured and many kinds of information can be relevant. However timely judgment process and outcome feedback are available and may improve the quality of an auditor's conclusions over time. Therefore, to test for the benefits of task-specific experience, I compare loan judgments provided by inexperienced seniors, experienced managers, and more experienced junior partners and senior managers to a criterion based on the conclusions of senior audit partners. While previous research usually does not indicate performance improvements beyond the level of an audit senior (e,g., Tan and Libby 1997) for this complex task with timely feedback, consistent and substantial performance improvements are reported here. Auditors provided increasingly more appropriate and less biased judgments, and they achieved greater judgment consensus.
This article draws an analytical distinction between two types of market uncertainty: egocentric, which refers to a focal actor's uncertainty regarding the best way to convert a set of inputs to an output desired by a potential exchange partner, and altercentric, which denotes the uncertainty confronted by a focal actor's exchange partners regarding the quality of the output that the focal actor brings to the market. Given this distinction, the article considers how the value of "structural holes" and market status vary with these two types of uncertainty. The article proposes that the value of structural holes increases with egocentric uncertainty, but not with altercentric uncertainty. In contrast, the value of status increases with altercentric uncertainty, but declines with egocentric uncertainty. Thus actors with networks rich in structural holes should sort into markets or market segments that are high in egocentric uncertainty; high-status actors should sort into markets that are low in egocentric uncertainty. Support for this claim is found in an examination of the venture capital markets.
Entrepreneurial activity varies substantially across regions and sectors and appears to be related to the stigma of failure. To understand this phenomenon, I present a multiple-equilibrium model based on endogenous stigma of failure. Using private information, entrepreneurs choose whether to continue a project or to abandon it and raise funds to undertake a new project. Project outcomes depend on luck and ability, and the cost of capital for failed entrepreneurs is determined by the market's expectations about their ability. In the conserva- tive equilibrium failed entrepreneurs face a high cost of capital and thus good entrepreneurs are reluctant to terminate a project. The resulting low quality of the pool of failed entrepreneurs justies in turn the high cost of capital. The reverse is true in the experimental equilibrium where good entrepreneurs are more willing to start again and the cost of capital for failed entrepreneurs is low. The experimental equilibrium is not always ecient: The conservative equilibrium dominates in low-risk and capital intensive sectors. I study in this context the eciency of institutions such as bankruptcy rules and fresh start policy. I show that policies aimed at increasing the survival of start-ups can have important counterproductive eects.
Industrial classifications were used as a basis for operational definitions of both industrial and organizational task environments. A codification of six environmental dimensions was reduced to three: munificence (capacity), complexity (homogeneity-heterogeneity, concentration-dispersion), and dynamism (stability-instability, turbulence). Interitem and factor analytic techniques were used to explore the viability of these environmental dimensions. Implications of the research for building both descriptive and normative theory about organization-environment relationships are advanced.
Estimating the likelihood of future events is a critical aspect of making a variety of marketing management decisions. Prior research has shown very robust patterns in the probability assessments of individuals, the predominant finding being that individuals are overconfident. The author theoretically investigates why overconfidence occurs by drawing on prior work on how cognitions are used in decisions. Specifically, the effects of evaluative feedback, counterfactual reasoning, and expertise are explored in two experiments in the context of making strategic marketing predictions. The findings provide some novel insights on overconfidence and accuracy of predictions. They suggest that (1) "humbling" feedback increases accuracy and lowers overconfidence, (2) overconfidence from being "blind sided" can be reduced by counterfactual reasoning, and (3) "richness" of experts' mental representations results in higher overconfidence. The author concludes with a discussion of these findings and managerial implications.
This chapter discusses the psychology of persuasion. Topics discussed include the following: (1) the process of conviction, (2) the emotional appeal, (3) the art of rationalization, (4) desire and conviction, (5) the varieties of evidence, (6) specious arguments based on correlation, (7)
Post hoc ergo propter hoc, (8) affirming the consequent, (9) impressiveness of words, (10) the mind of the average man, (11) the average audience, and (12) experimental studies of audience reactions. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Investigates the growth patterns of new ventures. A multimethod research design is employed to address criticisms of the literature on stages of growth. While the previous research found that problems influence internal organization, this study determines that problems also influence growth patterns. Two case studies are undertaken to examine the growth patterns of technology-based startups. Sixty managers and other employees were interviewed at two manufacturers of computer-based office products, located in Pennsylvania and Florida. This research generates a midrange theory of growth that applies only to certain organizations. The four stage model includes conception and development, commercialization, growth and stability. The validity of this stage-of-growth model is then assessed by studying the relation of dominant problems to stage. Four primary patterns of association are investigated, using responses to 105 questionnaires sent to a portfolio of firms in 1982. Types of problems include resource acquisition, technology development, vendor relations, production start-up, growth of sales and market share, profitability and internal controls. Results demonstrate that particular dominant problems are linked to each stage of growth. Problems and stages of growth do overlap, but there is also some support for a predictable pattern of problems faced by a firm as it grows. (SFL)
Managers make decisions on behalf of shareholders. In this context, financial economists have promoted executive stock options as a means to realign the incentives of managers with those of shareholders. We argue that overconfidence and optimism, which are likely to characterize managers, provide an alternative solution to this agency problem. Whereas risk-averse rational managers tend to postpone the addition of new projects until precise information is known about them, overconfident and optimistic managers hesitate less before making their decisions. Moderate levels of overconfidence and optimism tend to align these decisions with the interests of shareholders, increase firm value, and reduce the need for option compensation. In fact, compensating overconfident, optimistic managers as if they were rational hurts shareholders by unnecessarily transferring shareholder wealth to managers and by encouraging managers to take risks that are not in shareholders' best interests.
Investigates network dyads and the manner in which control is exercised in these structures. Four entrepreneurial, high growth firms, each from a different industry, were selected to participate in this ethnographic analysis. The represented industries are telephone equipment, clothing, computer hardware, and environmental support systems. Seven network dyads were identified for the four firms considered. The partnerships were typically other members of the value chain - e.g., suppliers, distributors and final customers. The analysis identified three phases for the network dyad development: preconditions for exchange, conditions to build, and integration and control. The first phase, preconditions, utilized prior relations in addition to personal and firm reputations to reduce uncertainty and establish expectations and obligation. The second phase, the building process, has significant reliance on the trust and the development of reciprocity norms. The third phase is marked by three forms of integration: operational, strategic, and social control. Examination of the four firms and their seven dyadic relationships support the model. These firms were found to be engaged in stable, sustained relationships with a high degree of cooperation and collaboration. The mode of exchange found in these dyadic relationships is characterized as a network form of governance, which appears to be beneficial to high growth firms. Further research using this model could be done for R&D partnerships, cooperative marketing agreements, and other forms of strategic alliances and joint ventures. (SRD)
This article surveys the theoretical and empirical literature on mechanisms that confer advantages and disadvantages on first-mover firms. Major conceptual issues are addressed, and recommendations are given for future research. Managerial implications are also discussed.
Despite widespread agreement among organizational researchers that intangible resources underlie performance differences among organizations, little empirical evidence exists in the literature. Building on the idea that reputation is socially constructed, this paper depicts reputation as the outcome of the process of legitimation. It observes that organizational researchers have overlooked how certification contests legitimate organizations, generate status orderings, and create favorable reputations. This paper suggests that victories in certification contests are credentials that enable firms to acquire a reputation for competence. It predicts that cumulative victories improve the survival of organizations and better the life chances of startup organizations more than those of lateral entries. These predictions are analyzed in the American auto industry during 1895–1912 when special-purpose product rating agencies were absent and reliability and speed contests served as credentialing devices. The results show that cumulative victories in contests extend the life chances of winning organizations but there is no evidence that new startup organizations benefit more than lateral entries. These findings underscore the significance of intangible assets and point to the need for an institutionally informed theory of competences.
Entry order analysis often shows that early entrants to an industry or technical subfield of an industry outperform laggards. Some studies, though, have found that late entrants prevail. This paper tests dual-clock hypotheses of entry order effects on performance, measured both as market share and survival. One entry clock records the entry of all entrants to a new technical subfield within an industry, while a second clock records the entry of industry incumbents. Relative to the appropriate clock, early entrants are predicted to outperform laggards, but when entry is measured on only one clock, the estimated influences may be inaccurate. Error will be particularly likely if a study contains a survivor bias. The study, which finds entry timing trade-offs between market share and survival, is generalizable to cases in which a plausible set of conditions is found.
This paper examines the impact venture capital can have on the development of new firms. Using a hand-collected data set on Silicon Valley start-ups, we find that venture capital is related to a variety of professionalization measures, such as human resource policies, the adoption of stock option plans, and the hiring of a marketing VP. Venture-capital-backed companies are also more likely and faster to replace the founder with an outside CEO, both in situations that appear adversarial and those mutually agreed to. The evidence suggests that venture capitalists play roles over and beyond those of traditional financial intermediaries.