Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation

References

• Aldrich H , Yang T (2014) How do entrepreneurs know what they know? Learning and organizing in new ventures. J. Evolutionary Econom. 24:59–82.Crossref, Google Scholar
• Alvarez SA , Barney JB (2005) How do entrepreneurs organize firms under conditions of uncertainty? J. Management 31(5):776–793.Crossref, Google Scholar
• Astebro T , Jeffrey SA , Adomdza G (2007) Inventor perseverance after being told to quit: The role of cognitive biases. J. Behav. Decision Making 20(3):253–272.Crossref, Google Scholar
• Bar-Gill O (2006) The evolution and persistence of optimism in litigation. J. Law Econom. Organ. 22(2):490–507.Crossref, Google Scholar
• Baron RA , Tang J , Hmieleski KM (2011) The downside of being “up”: Entrepreneurs’ dispositional positive affect and firm performance. Strategic Entrepreneurship J. 5(2):101–119.Crossref, Google Scholar
• Bernardo A , Welch I (2001) On the evolution of over-confidence and entrepreneurs. J. Econom. Management Strategy 10(3):301–330.Crossref, Google Scholar
• Bloom N , Jones C , Van Reenen J , Webb M (2019) Are ideas getting harder to find? NBER Working Paper 23782, National Bureau of Economic Research, Cambridge, MA.Google Scholar
• Brown JD , Marshall MA (2001) Great expectations: Optimism and pessimism in achievement setting. Chang EC , ed. Optimism and Pessimism: Implications for Theory, Research, and Practice (American Psychological Association, Washington, DC), 239–255.Crossref, Google Scholar
• Buchanan GM , Seligman MEP , eds. (1995) Explanatory Style (Lawrence Erlbaum Associates, Hillsdale, NJ).Google Scholar
• Buehler R , Griffin D , Ross M (1994) Exploring the ‘planning fallacy’: Why people underestimate their task completion times. J. Personality Soc. Psych. 67(3):366–381.Crossref, Google Scholar
• Busenitz L , Barney J (1997) Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decisions making. J. Bus. Venturing 12(1):9–30.Crossref, Google Scholar
• Carpenter P , Just M , Shell P (1990) What one intelligence test measures: A theoretical account of the processing in the Raven Progressive Matrices Test. Psych. Rev. 97(3):404–431.Crossref, Google Scholar
• Carver CS , Scheier M (2003) Optimism. Lopez SJ , Snyder CR , eds. Positive Psychological Assessment: A Handbook of Models and Measures (American Psychological Association, Washington, DC), 75–89.Crossref, Google Scholar
• Carver CS , Scheier MF (2014) Dispositional optimism. Trends Cognitive Sci. 18(6):293–299.Crossref, Google Scholar
• Carver CS , Scheier MF , Segerstrom SC (2010) Optimism. Clinical Psych. Rev. 30(7):879–889.Crossref, Google Scholar
• Cassar G (2010) Are individuals entering self-employment overly optimistic? An empirical test of plans and projections on nascent entrepreneur expectations. Strategic Management J. 31(8):822–840.Google Scholar
• Chen G , Crossland C , Luo S (2015) Making the same mistake all over again: CEO overconfidence and corporate resistance to collective feedback. Strategic Management J. 36(10):1513–1535.Crossref, Google Scholar
• Chen J , Croson D , Elfenbein D , Posen H (2018) The impact of learning and overconfidence on entrepreneurial entry and exit. Organ. Sci. 29(6):989–1009.Link, Google Scholar
• Cheng YT , Van de Ven A (1996) Learning the innovation journey: Order out of chaos? Organ. Sci. 7(6):593–682.Link, Google Scholar
• Chopik W , Kim ES , Smith J (2015) Changes in optimism are associated with changes in health over time among older adults. Soc. Psych. Personalality Sci. 6(7):814–822.Crossref, Google Scholar
• Chowdhury R , Sharot T , Wolfe T , Duzel E (2014) Optimistic update bias increases in older age. Psych. Medicine 44(9):2003–2012.Crossref, Google Scholar
• Cooper A , Woo CY , Dunkelberg WC (1988) Entrepreneurs’ perceived chances of success. J. Bus. Venturing 3(2):97–108.Crossref, Google Scholar
• Cope J (2005) Toward a dynamic learning perspective of entrepreneurship. Entrepreneurship Theory Practice 29(4):373–397.Crossref, Google Scholar
• Corbett A (2005) Experiential learning within the process of opportunity identification and exploitation. Entrepreneurship Theory Practice 29(4):473–491.Crossref, Google Scholar
• Corbett A (2007) Learning asymmetries and the discovery of entrepreneurial opportunities. J. Bus. Venturing 22(1):97–118.Crossref, Google Scholar
• Coutts A (2019) Good news and bad news are still news: Experimental evidence on belief updating. Experiment. Econom. 22:369–395.Crossref, Google Scholar
• Crane FG , Crane EC (2007) Dispositional optimism and entrepreneurial success. Psych. Management J. 10(1):13–25.Google Scholar
• Croson R , Fatas E , Neugebauer T , Morales A (2015) Excludability: A laboratory study of forced ranking in team production. J. Econom. Behav. Organ. 114:13–26.Crossref, Google Scholar
• Dahlin K , Chuang YT , Roulet T (2018) Opportunity, motivation, and ability to learn from failures and errors: Review, synthesis and ways to move forward. Acad. Management Ann. 12(1):252–277.Crossref, Google Scholar
• Dawson C , de Meza D , Henley A , Arabsheibani GR (2014) Entrepreneurship: Cause and consequence of financial optimism. J. Econom. Management Strategy 23(4):717–742.Crossref, Google Scholar
• Dencker JC , Gruber M , Shah SK (2009) Pre-entry knowledge, learning, and the survival of new firms. Organ. Sci. 20(3):516–537.Link, Google Scholar
• Duran P , Kammerlander N , Van Essen M , Zellweger T (2016) Doing more with less: Innovation input and output in family firms. Acad. Management J. 59(4):1224–1264.Crossref, Google Scholar
• Dushnitsky G (2010) Entrepreneurial optimism in the market for technological inventions. Organ. Sci. 21(1):150–167.Link, Google Scholar
• Eberhart R , Eesley C , Eisenhardt K (2017) Failure is an option: Institutional change, entrepreneurial risk, and new firm growth. Organ. Sci. 28(1):93–112.Link, Google Scholar
• Eckel C , Fatas E , Godoy S , Wilson R (2016) Group-level selection increases cooperation in the public goods game. PLoS One 11(8):1–13.Crossref, Google Scholar
• Eil D , Rao J (2011) The good news-bad news effect: Asymmetric processing of objective information about yourself. Amer. Econom. J. Microeconomics 3(2):114–138.Crossref, Google Scholar
• Elfenbein D , Knott AM , Croson R (2017) Equity stakes and exit: An experimental approach to decomposing exit delays. Strategic Management J. 38(2):278–299.Crossref, Google Scholar
• Evans JSBT (1993) The mental model of conditional reasoning: Critical appraisal and revision. Cognition 48(1):1–20.Crossref, Google Scholar
• Fiol CM , Lyles M (1985) Organizational learning. Acad. Management Rev. 10(4):803–813.Crossref, Google Scholar
• Fiske ST , Taylor SE (1991) Social Cognition (McGraw-Hill, New York).Crossref, Google Scholar
• Fitzgerald T , Tennen H , Affleck G , Pransky G (1993) The relative importance of dispositional optimism and control appraisals in quality of life after coronary artery bypass surgery. J. Behav. Medicine 16:25–43.Crossref, Google Scholar
• Forbes DP (2005) Are some entrepreneurs more overconfident than others? J. Bus. Venturing 20(5):623–640.Crossref, Google Scholar
• Gaglio CM , Katz J (2001) The psychological basis of opportunity identification: Entrepreneurial alertness. Small Bus. Econom. 16:95–111.Crossref, Google Scholar
• Galasso A , Simcoe T (2011) CEO overconfidence and innovation. Management Sci. 57(8):1469–1484.Link, Google Scholar
• Gallagher M , Lopez S , Pressman S (2012) Optimism is universal: Exploring the presence and benefits of optimism in a representative sample of the world. J. Personality 81(5):429–440.Crossref, Google Scholar
• Gambardella A , Camuffo A , Spina C , Cordova A (2020) A scientific approach to entrepreneurial decision-making: Evidence from a randomized control trial. Management Sci. 66(2):564–586.Google Scholar
• Geers AL , Lassiter GD (2002) Effects of affective expectations on affective experience: The moderating role of optimism-pessimism. Personality Soc. Psych. Bull. 28(8):1026–1039.Crossref, Google Scholar
• Gibson B , Sanbonmatsu D (2004) Optimism, pessimism, and gambling: The downside of optimism. Personality Soc. Psych. Bull. 30(2):149–160.Crossref, Google Scholar
• Goldstein WM , Hogarth RM (1997) Judgment and decision research: Some historical context. Goldstein WM , Hogarth RM , eds. Research on Judgment and Decision Making: Currents, Connections and Controversies (Cambridge University Press, New York), 3–68.Google Scholar
• Graham JR , Harvey CR , Puri M (2013) Managerial attitudes and corporate actions. J. Financial Econom. 109(1):103–121.Crossref, Google Scholar
• Griliches Z (1990) Patent statistics as economic indicators: A survey. J. Econom. Literature 28(4):1661–1707.Google Scholar
• Gruber M , Kim SM , Brinckmann J (2015) What is an attractive business opportunity? An empirical study of opportunity evaluation decisions by technologists, managers and entrepreneurs. Strategic Entrepreneurship J. 9(3):205–225.Crossref, Google Scholar
• Hall BH (1993) The stock market’s valuation of R&D investment during the 1980’s. Amer. Econom. Rev. 83(2):259–264.Google Scholar
• Hausman J , Hall B , Griliches Z (1984) Econometric models for count data with an application to the patents-R&D relationship. Econometrica 52(4):909–938.Crossref, Google Scholar
• Heaton J (2002) Managerial optimism and corporate finance. Financial Management 31(2):33–45.Crossref, Google Scholar
• Heger S , Papageorge N (2018) We should totally open a restaurant: How optimism and overconfidence affect beliefs. J. Econom. Psych. 67:177–190.Crossref, Google Scholar
• Heinonen K , Räikkönen K , Matthews KA , Scheier MF , Raitakari OT , Pulkki L , Keltikangas-Järvinen L (2006) Socioeconomic status in childhood and adulthood: Associations with dispositional optimism and pessimism over a 21-year follow-up. J. Personality 74(4):1111–1126.Crossref, Google Scholar
• Herz H , Schunk D , Zehnder C (2014) How do judgmental overconfidence and overoptimism shape innovative activity? Games Econom. Behav. 83:1–23.Crossref, Google Scholar
• Hirshleifer D , Hsu PH , Li D (2013) Innovative efficiency and stock returns. J. Financial Econom. 107(3):632–654.Crossref, Google Scholar
• Hirshleifer D , Low A , Teoh SH (2012) Are overconfident CEOs better innovators? J. Finance 67(4):1457–1498.Crossref, Google Scholar
• Hmieleski KM , Baron RA (2009) Entrepreneurs’ optimism and new venture performance: A social cognitive perspective. Acad. Management J. 52(3):473–488.Crossref, Google Scholar
• Hmieleski KM , Corbett AC , Baron RA (2013) Entrepreneurs’ improvisational behavior and firm performance: A study of dispositional and environmental moderators. Strategic Entrepreneurship J. 7(2):138–150.Crossref, Google Scholar
• Hogarth R , Karelaia N (2012) Entrepreneurial success and failure: Confidence and fallible judgment. Organ. Sci. 23(6):1733–1747.Link, Google Scholar
• Holt CA , Laury S (2002) Risk aversion and incentive effects. Amer. Econom. Rev. 92(5):1644–1655.Crossref, Google Scholar
• Jacobsen B , Lee J , Marquering W , Zhang C (2014) Gender differences in optimism and asset allocation. J. Econom. Behav. Organ. 107(B):630–651.Crossref, Google Scholar
• Jain A (2013) Learning by doing and the locus of innovative capability in the biotechnology research. Organ. Sci. 24(6):1683–1700.Link, Google Scholar
• Johnson-Laird PN (1983) Mental Models: Toward a Cognitive Science of Language, Inference and Consciousness (Cambridge University Press, Cambridge, UK).Google Scholar
• Kahneman D , Lovallo D (1993) Timid choices and bold forecasts: A cognitive perspective on risk taking. Management Sci. 39(1):17–31.Link, Google Scholar
• Khanna R , Guler I , Nerkar A (2016) Fail often, fail big, and fail fast? Learning from small failures and R&D performance in the pharmaceutical industry. Acad. Management J. 59(2):436–459.Crossref, Google Scholar
• King G , Zeng L (2001) Logistic regression in rare events data. Political Anal. 9(2):137–163.Crossref, Google Scholar
• Koellinger P , Minniti M , Schade C (2007) “I think I can, I think I can”: Overconfidence and entrepreneurial behavior. J. Econom. Psych. 28(4):502–527.Crossref, Google Scholar
• Kolb DA (1984) Experiential Learning (Prentice Hall, Englewood Cliffs, NJ).Google Scholar
• Koudstaal M , Sloof R , Van Praag M (2017) Are entrepreneurs more optimistic and overconfident than managers and employees? Working paper, Tinbergen Institute Discussion Paper No. 15-124/VII, Tinbergen Institute, Amsterdam.Google Scholar
• Krane A , Terhorst L , Bovbjerg DH , Scheier MF , Kucinski B , Geller DA , Marsh W , Tsung A , Steel JL (2018) Putting the life in lifestyle: Lifestyle choices after a diagnosis of cancer predicts overall survival. Cancer 124(16):3417–3426.Crossref, Google Scholar
• Landier A , Thesmar D (2009) Financial contracting with optimistic entrepreneurs. Rev. Financial. Stud. 22(1):117–150.Crossref, Google Scholar
• Levitt B , March G (1988) Organizational learning. Annual Rev. Sociol. 14:319–340.Crossref, Google Scholar
• Lowe R , Ziedonis R (2006) Overoptimism and the performance of entrepreneurial firms. Management Sci. 52(2):173–186.Link, Google Scholar
• March J (1996) Learning to be risk averse. Psych. Rev. 103(2):309–319.Crossref, Google Scholar
• Marvel MR , Lumpkin GT (2007) Technology entrepreneurs’ human capital and its effects on innovation radicalness. Entrepreneurship Theory Practice 31(6):807–828.Crossref, Google Scholar
• Maslach D (2016) Change and persistence with failed technological innovation. Strategic Management J. 37(4):714–723.Crossref, Google Scholar
• McMullen J , Shepherd D (2006) Entrepreneurial action and the role of uncertainty in the theory of the entrepreneur. Acad. Management Rev. 31(1):132–152.Crossref, Google Scholar
• Minniti M , Bygrave W (2001) A dynamic model of entrepreneurial learning. Entrepreneurship Theory Practice 25(3):5–16.Crossref, Google Scholar
• Mitchell RK , Smith JB , Morse EA , Seawright KW , Peredo AM , McKenzie B (2002) Are entrepreneurial cognitions universal? Assessing entrepreneurial cognitions across cultures. Entrepreneurship Theory Practice 26(4):9–32.Crossref, Google Scholar
• Moore D , Healy P (2008) The trouble with overconfidence. Psych. Rev. 115(2):502–517.Crossref, Google Scholar
• Mosing M , Zietsch B , Shekar S , Wright M , Martin NG (2009) Genetic and environmental influences on optimism and its relationship to mental and self-rated health: A study of aging twins. Behav. Genetics 39(6):597–604.Crossref, Google Scholar
• Parker S (2006) Learning about the unknown: How fast do entrepreneurs adjust their beliefs? J. Bus. Venturing 21(1):1–26.Crossref, Google Scholar
• Parker S (2009) The Economics of Entrepreneurship (Cambridge University Press).Crossref, Google Scholar
• Peterson S , Walumbwa F , Byron K , Myrowitz J (2009) CEO positive psychological traits, transformational leadership, and firm performance in high-technology start-up and established firms. J. Management 35(2):348–368.Google Scholar
• Plomin R , Scheier MF , Bergeman CS , Pedersen NL , Nesselroade JR , McClearn GE (1992) Optimism, pessimism, and mental health: A twin/adoption analysis. Personality Individual Differences 13(8):921–930.Crossref, Google Scholar
• Politis D (2005) The process of entrepreneurial learning: A conceptual framework. Entrepreneurship Theory Practice 29(4):399–424.Crossref, Google Scholar
• Puri M , Robinson DT (2007) Optimism and economic choice. J. Financial Econom. 86(1):71–99.Crossref, Google Scholar
• Puri M , Robinson DT (2013) The economic psychology of entrepreneurship and family business. J. Econom. Management. Strategy 22(2):423–444.Crossref, Google Scholar
• Ravichandran T , Han S , Mithas S (2017) Mitigating diminishing returns to R&D: The role of information technology in innovation. Inform. Systems Res. 28(4):812–827.Link, Google Scholar
• Rouse W , Morris N (1986) On looking into the black box: Prospects and limits in the search for mental models. Psych. Bull. 100(3):349–363.Crossref, Google Scholar
• Santos J , Tenreyro S (2006) The log of gravity. Rev. Econom. Statist. 88(4):641–658.Crossref, Google Scholar
• Scheier MF , Carver CS (1985) Optimism, coping, and health: Assessment and implications of generalized outcome expectancies. Health Psych. 4(3):219–247.Crossref, Google Scholar
• Scheier MF , Carver CS (1992) Effects of optimism on psychological and physical well-being: Theoretical overview and empirical update. Cognitive Therapy Res. 16:201–228.Crossref, Google Scholar
• Scheier MF , Carver CS , Bridges MW (1994) Distinguishing optimism from neuroticism (and trait anxiety, self-mastery, and self-esteem): A reevaluation of the Life Orientation Test. J. Personality Soc. Psych. 67(6):1063–1078.Crossref, Google Scholar
• Scheier MF , Carver CS , Bridges MW (2001) Optimism, pessimism, and psychological well-being. Chang EC , ed. Optimism and Pessimism: Implications for Theory, Research, and Practice (American Psychological Association, Washington, DC), 189–216.Crossref, Google Scholar
• Schofield P , Ball D , Smith J , Borland R , O’Brien P , Davis S (2004) Optimism and survival in lung carcinoma patients. Cancer 100(6):1276–1282.Crossref, Google Scholar
• Schulman P , Keith D , Seligman MEP (1993) Is optimism heritable? A study of twins. Behav. Res. Therapy 31(6):569–574.Crossref, Google Scholar
• Segerstrom SC , Solberg Ness L (2006) When goals conflict but people prospect: The case of dispositional optimism. J. Res. Personality 40(5):675–693.Crossref, Google Scholar
• Seligman MEP (2002) Authentic Happiness (The Free Press, New York).Google Scholar
• Shane S (2000) Prior knowledge and the discovery of entrepreneurial opportunities. Organ. Sci. 11(4):448–469.Link, Google Scholar
• Shane S (2003) A General Theory of Entrepreneurship: The Individual-Opportunity Nexus (Edward Elgar, Cheltenham, UK).Crossref, Google Scholar
• Sharot T , Korn C , Dolan J (2011) How unrealistic optimism is maintained in the face of reality. Nature Neuroscience 14:1475–1479.Crossref, Google Scholar
• Sharot T , Riccardi A , Raio C , Phelps E (2007) Neural mechanisms mediating optimism bias. Nature 450:102–105.Crossref, Google Scholar
• Sharot T , Kanai R , Marston D , Korn C , Rees G , Dolan J (2012) Selectively altering belief formation in the human brain. Proc. Natl. Acad. Sci. USA 109(42):17058–17062.Crossref, Google Scholar
• Shepherd D (2003) Learning from business failure: Propositions of grief recovery for the self-employed. Acad. Management Rev. 28(2):318–328.Crossref, Google Scholar
• Simon M , Shrader RC (2012) Entrepreneurial actions and optimistic overconfidence: The role of motivated reasoning in new product introductions. J. Bus. Venturing 27(3):291–309.Crossref, Google Scholar
• Simon M , Houghton SM , Aquino K (2000) Cognitive biases, risk perception, and venture formation: How individuals decide to start companies. J. Bus. Venturing 15(2):113–134.Crossref, Google Scholar
• Van der Vegt G , De Jong S , Bunderson S , Molleman E (2010) Power asymmetry and learning in teams: The moderating role of performance feedback. Organ. Sci. 21(2):347–361.Link, Google Scholar
• Weinstein N (1980) Unrealistic optimism about future life events. J. Personality Soc. Psych. 39(5):806–820.Crossref, Google Scholar
• Wilhelm H , Richter A , Semrau T (2019) Employee learning from failure: A team-as-resource perspective. Organ. Sci. 30(4):694–714.Link, Google Scholar
• Zelner B (2009) Using simulation to interpret results from logit, probit, and other nonlinear models. Strategic Management J. 30(12):1335–1348.Crossref, Google Scholar