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Cited by 165

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Optimism, overconfidence and entrepreneurial activity

Trevelyan, Rose·2008·Management Decision
DOI 10.1108/00251740810890177
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Abstract

Purpose: This paper aims to explore the question of confidence in entrepreneurship, and the impact confidence has on key tasks in the venture development process. Design/methodology/approach: Propositions about the relationship between key elements of confidence (optimism and overconfidence) are made in order to unpack the confidence construct. Simple tests of these propositions are conducted using a small sample of Australian entrepreneurs. Further propositions are made about the impact of optimism and overconfidence on activity across different phases of the new venture development process. Findings: Two elements of confidence, optimism and overconfidence, are distinct in their association with each other and with a third individual difference (regulatory focus). The dual and sometimes opposing impacts of optimism and overconfidence on new venture activity are explored. Optimism and overconfidence are both beneficial when deciding to become an entrepreneur, but overconfidence is harmful when making decisions in response to setbacks. Research limitations/implications: Conclusions are limited by the sample size and simple analytical techniques. Rather, the impact of the paper is in the implications of the independence of optimism and overconfidence. Future research can explore and test the propositions made about when each is harmful and when beneficial. Practical implications: For entrepreneurs, it is important to be aware of your optimism and overconfidence in different situations. When optimism is beneficial, use it, but when overconfidence is harmful, mitigate against it by asking the right questions and working with others to check assumptions and strategies. Originality/value: This paper distinguishes between two individual differences, optimism and overconfidence, that are typically thought to be interdependent and beneficial for entrepreneurs.

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Metadata

Authors
Trevelyan, R.
Venue
Management Decision
Publisher
Emerald
Published
2008-08-01
Volume
46
Issue
7
Pages
986-1001
ISSN
0025-1747
DOI
10.1108/00251740810890177
Cited by
165
References
3
Language
en
Licence
www.emerald.com/insight/site-policies (tdm)

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