Are Entrepreneurs More Optimistic and Overconfident than Managers and Employees?

Tinbergen Institute Discussion Paper 15-124/VII

33 Pages Posted: 8 Nov 2015

See all articles by Martin Koudstaal

Martin Koudstaal

University of Amsterdam; Tinbergen Institute

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB); Tinbergen Institute

Mirjam van Praag

University of Amsterdam - Department of Economics; Copenhagen Business School; Tinbergen Institute; IZA Institute of Labor Economics

Date Written: November 5, 2015

Abstract

Empirical evidence supports the conventional wisdom that entrepreneurs are more optimistic and overconfident than others. However, the same holds true for top managers. In this lab-in-the-field experiment we directly compare the scores of entrepreneurs, managers and employees on a comprehensive set of measures of optimism and overconfidence (n=2,058). The results show that on average entrepreneurs are more optimistic than others in their dispositional optimism and attributional style when bad events occur. For incentivized measures of overconfidence we find no difference between entrepreneurs and managers, although both are more prone to it than employees. Finally, exploration of within-group heterogeneities shows that optimism and success are more strongly related for managers than for entrepreneurs and that an average entrepreneur is not more optimistic than successful managers. We conclude that optimism and overconfidence are indeed characteristics of entrepreneurs, but they are not unique when compared to (top) managers.

Keywords: Entrepreneurs, managers, dispositional optimism, attributional style, overestimation, overconfidence, behavioral economics

JEL Classification: L26, C93, D03, M13

Suggested Citation

Koudstaal, Martin and Sloof, Randolph and van Praag, Mirjam and van Praag, Mirjam, Are Entrepreneurs More Optimistic and Overconfident than Managers and Employees? (November 5, 2015). Tinbergen Institute Discussion Paper 15-124/VII, Available at SSRN: https://ssrn.com/abstract=2687101 or http://dx.doi.org/10.2139/ssrn.2687101

Martin Koudstaal (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Mirjam Van Praag

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 4096 (Phone)
+31 20 525 4182 (Fax)

Copenhagen Business School ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Tinbergen Institute

Gustav Mahlerlaan
Amsterdam
Netherlands

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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