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Inventor Perseverance after Being Told to Quit : The Role of Cognitive Biases

Author

Listed:
  • Thomas Astebro

    (Joseph L. Rotman School of Management - University of Toronto)

  • Scott A. Jeffrey
  • Gordon K. Adomdza

Abstract

We find that approximately one third (29%) of independent inventors continue to spend money and 51% continue to spend time on projects after receiving highly diagnostic advice to cease effort. Using survey data from actual inventors, this paper studies the role of overconfidence, optimism, and the sunk-cost bias in these decisions. We find that inventors are more overconfident and optimistic than the general population. We also find that optimism and past expenditures increased perseverance after being told to quit, while overconfidence in judgment ability had no effect. After being told to quit, optimists spend 166% more than pessimists and those having already spent, for example, $10 000 spend another $10 000.

Suggested Citation

  • Thomas Astebro & Scott A. Jeffrey & Gordon K. Adomdza, 2007. "Inventor Perseverance after Being Told to Quit : The Role of Cognitive Biases," Post-Print hal-00476770, HAL.
  • Handle: RePEc:hal:journl:hal-00476770
    DOI: 10.1002/bdm.554
    Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00476770
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    Citations

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    Cited by:

    1. Thomas Astebro & Holger Herz & Ramana Nanda & Roberto A. Weber, 2014. "Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 49-70, Summer.
    2. repec:wsi:ijimxx:v:22:y:2018:i:03:n:s136391961850024x is not listed on IDEAS
    3. repec:spr:manrev:v:68:y:2018:i:2:d:10.1007_s11301-018-0135-9 is not listed on IDEAS
    4. repec:eee:enepol:v:123:y:2018:i:c:p:92-103 is not listed on IDEAS
    5. repec:eee:eecrev:v:111:y:2019:i:c:p:53-69 is not listed on IDEAS
    6. Julian S. Frankish & Richard G. Roberts & Alex Coad & Taylor C. Spears & David J. Storey, 2013. "Do entrepreneurs really learn? Or do they just tell us that they do?," Industrial and Corporate Change, Oxford University Press, vol. 22(1), pages 73-106, February.
    7. Gary Dushnitsky, 2010. "Entrepreneurial Optimism in the Market for Technological Inventions," Organization Science, INFORMS, vol. 21(1), pages 150-167, February.
    8. Dawson, Christopher & de Meza, David Emmanuel & Henley, Andrew & Arabsheibani, Reza, 2015. "The Power of (Non) Positive Thinking: Self-Employed Pessimists Earn More than Optimists," IZA Discussion Papers 9242, Institute of Labor Economics (IZA).
    9. Gordon K. Adomdza & Thomas Åstebro & Kevyn Yong, 2016. "Decision biases and entrepreneurial finance," Small Business Economics, Springer, vol. 47(4), pages 819-834, December.
    10. Koellinger, Ph.D. & Treffers, T., 2012. "Joy leads to Overconfidence, and a Simple Remedy," ERIM Report Series Research in Management ERS-2012-001-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    11. repec:gam:jsusta:v:10:y:2018:i:7:p:2233-:d:155150 is not listed on IDEAS
    12. Thomas Åstebro & Carlos J. Serrano, 2011. "Business Partners, Financing, and the Commercialization of Inventions," NBER Working Papers 17181, National Bureau of Economic Research, Inc.
    13. Sabrina T. Howell, 2017. "Reducing Information Frictions in Venture Capital: The Role of New Venture Competitions," NBER Working Papers 23874, National Bureau of Economic Research, Inc.
    14. repec:eee:joepsy:v:67:y:2018:i:c:p:177-190 is not listed on IDEAS
    15. Cortés Aguilar Alexandra & Teresa Garcia-Muñoz & Ana I. Moro Egido, 2013. "Heterogeneous Self-employment and Subjective Well-Being. Evidence from Latin America," ThE Papers 13/05, Department of Economic Theory and Economic History of the University of Granada..

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