Abstract
A cognitive approach for explaining venture creation decisions offers great insights into entrepreneurship research. Examining venture creation decisions from a perspective that considers the cognitive states and perceptions of entrepreneurs further informs the critical role of cognitive constructs in entrepreneurial decision-making. This study provides empirical evidence for a theory of overconfidence that explains why some choose to become entrepreneurs. It explores the interconnections between overconfidence, risk perceptions, and venture creation decisions. More specifically, the growing importance of overconfidence in entrepreneurship encourages an examination of its association with venture creation decisions. Additionally, this research seeks to establish risk perceptions as a mediator for that relationship. Examining these relationships through a psychological perspective contributes to a growing body of entrepreneurial cognition research. This study makes a contribution by providing substantiation for the relationship between overconfidence and venture creation decisions. Equally important, the empirical evidence in this study is the first to provide support for the partially mediating role of risk perceptions. The findings presented here help to provide some insights into understanding why entrepreneurs tend to be more overconfident than non-entrepreneurs, particularly, since overconfidence is positively associated with the decision to start a new venture.
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Appendix
Appendix
Surveys
Overconfidence survey items
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1.
How many patents did the U.S. Patent and Trademark Office issue in 1990?
Low estimate: ____________________ High estimate: ____________________
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2.
How many of Fortune’s 1990 “Global 500,” the world’s biggest industrial corporations (in sales), were Japanese?
Low estimate: ____________________ High estimate: ____________________
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3.
How many passenger arrivals and departures were there at Chicago’s O’Hare airport in 1989?
Low estimate: ____________________ High estimate: ____________________
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4.
What was the total audited worldwide daily circulation of the Wall Street Journal during the first half of 1990?
Low estimate: ____________________ High estimate: ____________________
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5.
How many master’s degrees in business and management were conferred in the United States in 1987?
Low estimate: ____________________ High estimate: ____________________
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6.
How many passenger deaths occurred worldwide in scheduled commercial airliner accidents in the 1980’s?
Low estimate: ____________________ High estimate: ____________________
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7.
What is the shortest navigable distance (in statute miles) between New York City and Istanbul?
Low estimate: ____________________ High estimate: ____________________
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8.
What was General Motors’ total worldwide factory sales of cars and trucks (in units) in the 1980’s?
Low estimate: ____________________ High estimate: ____________________
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9.
How many German automobiles were sold in Japan in 1989?
Low estimate: ____________________ High estimate: ____________________
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10.
What was the total U.S. merchandise trade deficit with Japan (in billions) in the 1980’s?
Low estimate: ____________________ High estimate: ____________________
Risk perception survey items
I believe that…
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1.
The probability of the business’ product introduction doing poorly is very high.
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2.
The amount the business could lose by introducing new products is substantial.
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3.
There is great uncertainty when predicting how well the business will do with new product introductions.
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4.
The overall riskiness of the business’ product introduction is high.
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5.
Overall, I would label the option of introducing new products as something negative.
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6.
I would label introducing new products as a potential loss.
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7.
Introducing a new product will have negative ramifications for the business’ future.
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8.
There is high probability of the business losing a great deal by introducing new products.
Risk propensity survey items
Select the alternative that you would feel most comfortable with:
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1.
-
a)
an 80 % chance of winning $400, or
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b)
receiving $320 for sure
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a)
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2.
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a)
receiving $300 for sure, or
-
b)
20 % chance of winning $1,500
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a)
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3.
-
a)
an 90 % chance of winning $200, or
-
b)
receiving $180 for sure
-
a)
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4.
-
a)
receiving $160 for sure, or
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b)
10 % chance of winning $1,600
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a)
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5.
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a)
an 50 % chance of winning $500, or
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b)
receiving $250 for sure
-
a)
Venture creation decision survey items
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1.
I would start this business.
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2.
I would forgo other career choices to start this business.
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3.
I would quit my job to start this business.
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Robinson, A.T., Marino, L.D. Overconfidence and risk perceptions: do they really matter for venture creation decisions?. Int Entrep Manag J 11, 149–168 (2015). https://doi.org/10.1007/s11365-013-0277-0
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DOI: https://doi.org/10.1007/s11365-013-0277-0