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Are Entrepreneurs more Optimistic and Overconfident than Managers and Employees?

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  • Martin Koudstaal

    (VU University Amsterdam)

  • Randolph Sloof

    (VU University Amsterdam, the Netherlands)

  • Mirjam van Praag

    (Copenhagen Business School, Denmark)

Abstract

Empirical evidence supports the conventional wisdom that entrepreneurs are more optimistic and overconfident than others. However, the same holds true for top managers. In this lab-in-the-field experiment we directly compare the scores of entrepreneurs, managers and employees on a comprehensive set of measures of optimism and overconfidence (n = 2,058). The results show that on average entrepreneurs are more optimistic than others in their dispositional optimism and attributional style when bad events occur. For incentivized measures of overconfidence we find no difference between entrepreneurs and managers, although both are more prone to it than employees. Finally, exploration of within-group heterogeneities shows that optimism and success are more strongly related for managers than for entrepreneurs and that an average entrepreneur is not more optimistic than successful managers. We conclude that optimism and overconfidence are indeed characteristics of entrepreneurs, but they are not unique when compared to (top) managers.

Suggested Citation

  • Martin Koudstaal & Randolph Sloof & Mirjam van Praag, 2015. "Are Entrepreneurs more Optimistic and Overconfident than Managers and Employees?," Tinbergen Institute Discussion Papers 15-124/VII, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20150124
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    Cited by:

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    2. H. Young Baek & Florence Neymotin, 2019. "Overconfident entrepreneurs: Innovating more and paying the piper," Economics Bulletin, AccessEcon, vol. 39(2), pages 1144-1153.
    3. Frevel, Nicolas & Beiderbeck, Daniel & Schmidt, Sascha L., 2022. "The impact of technology on sports – A prospective study," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    4. Indy Bernoster & Cornelius A. Rietveld & A. Roy Thurik & Olivier Torrès, 2018. "Overconfidence, Optimism and Entrepreneurship," Sustainability, MDPI, vol. 10(7), pages 1-14, June.

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    More about this item

    Keywords

    Entrepreneurs; managers; dispositional optimism; attributional style; overestimation; overconfidence; behavioral economics;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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