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Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation

Author

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  • Mario Daniele Amore

    (Department of Management and Technology, Bocconi University and CEPR, 20100 Milan, Italy)

  • Orsola Garofalo

    (Department of Strategy and Innovation, Copenhagen Business School, 2000 Frederiksberg, Denmark)

  • Victor Martin-Sanchez

    (King’s Business School, King’s College London, London WC2B 4BG, United Kingdom)

Abstract

Extant research shows that entrepreneurs are typically overly optimistic about their ventures’ prospects and that such optimism hampers performance. We analyze how dispositional optimism affects the adjustments to entrepreneurs’ expectations after they receive negative feedback on their task performance. We then explore the relationship between optimism and the effectiveness of innovation. Exploiting unique firm-level data and a laboratory experiment involving 205 entrepreneurs, we find that dispositional optimism is negatively associated with both the likelihood and extent of belief updating in response to negative feedback. Furthermore, dispositional optimism triggers a discrepancy—between innovation inputs and outputs—that reduces a firm’s innovation effectiveness.

Suggested Citation

  • Mario Daniele Amore & Orsola Garofalo & Victor Martin-Sanchez, 2021. "Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation," Organization Science, INFORMS, vol. 32(4), pages 940-964, July.
    • Handle: RePEc:inm:ororsc:v:32:y:2021:i:4:p:940-964
    DOI: 10.1287/orsc.2020.1359
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    Cited by:

    1. Mario Amore & Orsola Garofalo & Victor Martin-Sanchez, 2022. "Dispositional optimism and business recovery during a pandemic," PLOS ONE, Public Library of Science, vol. 17(6), pages 1-16, June.
    2. Inés Alegre & Jasmina Berbegal-Mirabent & Victor Martin-Sanchez, 2025. "The role of experience and diversity on research consortia’ performance: an exploratory approach," Small Business Economics, Springer, vol. 64(1), pages 113-132, January.
    3. Yavuz, R. Isil & Dutta, Dev K. & Soytas, Mehmet A., 2024. "Extending behavioral theory of the firm to new ventures: Dispositional optimism as a moderating influence on new product introductions in high-tech ventures," Journal of Business Venturing Insights, Elsevier, vol. 22(C).

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