Szerb-Vörös: Entrepreneurial self-efficacy and success: the effect of experience on their evolution and relationship

In this article we attempt to explain the failure of many efforts to show, empirically, a link between entrepreneurial self-efficacy and success. At the same time, we reconcile the literature on entrepreneurial self-efficacy and overconfidence. By analysing GEM data, we show that early-stage entrepreneurs’ self-efficacy is consistently inflated, albeit in a variety of ways. Entrepreneurial overconfidence fades gradually and its form changes as business owners learn and gather experience by running their own ventures. By using Ajzen’s Theory of Planned Behaviour, we show that, depending on the form of overconfidence, the link between self-efficacy and growth projections may be mediated by product quality expectations. However, the huge decline in growth expectations associated with the aging of ventures seems to be due not to the changes in skill beliefs but rather the experience induced adjustments on entrepreneurial expectations. In addition, we have found that, at country level, experience moderates the relationship between expected firm growth and actual economic growth. Our results suggest that early-stage entrepreneurs’ overconfidence may –at least to some extent- function as a useful heuristic in an uncertain entrepreneurial world.