Small Business Economics

, Volume 47, Issue 4, pp 819–834 | Cite as

Decision biases and entrepreneurial finance

  • Gordon K. Adomdza
  • Thomas Åstebro
  • Kevyn Yong


We study the effects of three cognitive biases by the entrepreneur on obtaining funding. We find planning fallacy to increase funding amounts, whereas optimism and overconfidence by the entrepreneur have no effects on funding amounts from others. Further, planning fallacy positively impacts the probability of strong-tie (inside) investments but negatively impacts the probability of weak-tie (outside) investments. Mediation analyses further show that planning fallacy positively impacts venture performance through both self and other investor funding amounts. Our findings are not consistent with the pecking order theory of informal finance and suggest positive effects of at least one cognitive bias on entrepreneurial business success through increased funding.


Entrepreneurship Decision biases Cognitive biases Entrepreneurial finance Informal finance Fundraising Social ties Venture performance 

JEL Classifications

L26 D81 


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • Gordon K. Adomdza
    • 1
  • Thomas Åstebro
    • 2
  • Kevyn Yong
    • 3
  1. 1.Ashesi University CollegeAccraGhana
  2. 2.HEC ParisJouy-en-JosasFrance
  3. 3.ESSEC Business SchoolSingaporeSingapore

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