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When being wrong might be right: on overconfidence as an evolutionary mechanism of nascent entrepreneurs
Blekinge Institute of Technology, Faculty of Engineering, Department of Industrial Economics.
2015 (English)In: Innovation and Entrepreneurship in the Global Economy: Knowledge, Technology and Internationalization / [ed] Charlie Karlsson, Urban Gråsjö and Sofia Wixe, Edward Elgar Publishing, 2015, 237-258 p.Chapter in book (Refereed)
Abstract [en]

Empirical regularities regarding start-ups that do not show prolonged longevity have been known for some time. In this chapter, the regularity is argued to originate from an interaction between cognition-laden characteristics of entrepreneurs and contextual conditions. Overconfidence is argued to cause miscalibration of objective probabilities of success, which in turn causes excess entry, but also to negatively affect survival rates. Moreover, overconfidence is argued to be an evolutionary mechanism that helps explain the distribution of entrepreneurs at the local level. It does so by advocating overconfident entrepreneurs to be more likely to beacon personal, but miscalibrated, beliefs to others and thereby set off spillover effects. The bias is therefore argued to be detrimental to actors at an individual level (as it negatively affects survival rates), but favorable at the system level (as it facilitates spillover effects). The concluding discussion of these matters is extended by a discussion of policy issues.

Place, publisher, year, edition, pages
Edward Elgar Publishing, 2015. 237-258 p.
National Category
Economics Economic Geography Business Administration
URN: urn:nbn:se:bth-11741DOI: 10.4337/9781783477326.00018ISBN: 9781783477319OAI: diva2:912578
Available from: 2016-03-16 Created: 2016-03-16 Last updated: 2016-03-18Bibliographically approved

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