IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

How Do Judgmental Overconfidence and Overoptimism Shape Innovative Activity?

  • Holger Herz
  • Daniel Schunk
  • Christian Zehnder

Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on innovative activity. While overoptimism leads to an innovation enhancing effect, judgmental overconfidence inhibits innovation. Our results indicate that future research is well advised to take into account that the relationship between innovation and overconfidence may crucially depend on what type of overconfidence is most prevalent in a particular context.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-01/cesifo1_wp4084.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4084.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ceswps:_4084
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Antonio E. Bernardo & Ivo Welch, 2001. "On the Evolution of Overconfidence and Entrepreneurs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 301-330, 09.
  2. Benoît, Jean-Pierre & Dubra, Juan, 2007. "Overconfidence?," MPRA Paper 6017, University Library of Munich, Germany, revised Nov 2007.
  3. Robert A. Lowe & Arvids A. Ziedonis, 2006. "Overoptimism and the Performance of Entrepreneurial Firms," Management Science, INFORMS, vol. 52(2), pages 173-186, February.
  4. Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2009. "Innovation and Economic Development," MERIT Working Papers 032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  5. Ian Larkin & Stephen Leider, 2012. "Incentive Schemes, Sorting, and Behavioral Biases of Employees: Experimental Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 4(2), pages 184-214, May.
  6. Bronwyn H. Hall & Josh Lerner, 2009. "The Financing of R&D and Innovation," NBER Working Papers 15325, National Bureau of Economic Research, Inc.
  7. Terrance Odean, 1998. "Volume, Volatility, Price, and Profit When All Traders Are Above Average," Journal of Finance, American Finance Association, vol. 53(6), pages 1887-1934, December.
  8. Alberto Galasso & Timothy S. Simcoe, 2010. "CEO Overconfidence and Innovation," NBER Working Papers 16041, National Bureau of Economic Research, Inc.
  9. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  10. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  11. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
  12. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
  13. Markus K. Brunnermeier & Laura Veldkamp, 2013. "Leadership, Coordination, and Corporate Culture," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 512-537.
  14. Michael D. Grubb, 2009. "Selling to Overconfident Consumers," American Economic Review, American Economic Association, vol. 99(5), pages 1770-1807, December.
  15. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
  16. Biais, Bruno & Hilton, Denis & Mazurier, Karine & Pouget, Sébastien, 2004. "Judgmental Overconfidence, Self-Monitoring and Trading Performance in an Experimental Financial Market," IDEI Working Papers 259, Institut d'Économie Industrielle (IDEI), Toulouse.
  17. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
  18. Terrance Odean, 1998. "Volume, Volatility, Price and Profit When All Traders Are Above Average," Finance 9803001, EconWPA.
  19. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
  20. Blanchflower, D.G. & Oswald, A., 1991. "What Makes an Entrepreneur?," Economics Series Working Papers 99125, University of Oxford, Department of Economics.
  21. Marion Eberlein & Sandra Ludwig & Julia Nafziger, 2011. "The Effects Of Feedback On Self‐Assessment," Bulletin of Economic Research, Wiley Blackwell, vol. 63(2), pages 177-199, 04.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4084. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.