Psychologists say that people who are so ‘full of themselves’ and cocksure of their own abilities are the ones most likely to venture into markets that may be too small to accommodate another profitable business.
Research led by the University of Leicester, funded by the Economic and Social Research Council, has shown that overconfidence among businesspeople is a reason why many ventures fail in the first few years.
And the ones most culpable were people with absolute confidence in their own abilities.
The study was conducted by Dr Briony Pulford and Professor Andrew Colman of the University of Leicester, in collaboration with Dr Fergus Bolger, formerly of the University of Durham. The results are published in the journal Experimental Psychology (Volume 55, No. 2, 2008).
They set up a ‘game’ that simulated market conditions. Participants stood to gain capital, or make a loss, based on decisions they made in different market scenarios. The players had to choose whether or not to open restaurants given different market scenarios, using a combination of skill and luck in order to perform.
Dr Pulford, of the School of Psychology at the University of Leicester, who led the study, claimed that people should beware of overconfidence: “Our results showed that, when success depended on skill, overconfidence tended to cause excess entry into a market place, as has been predicted by previous psychological theories.
“Market entry decisions tend to be over-optimistic, with the inevitable result that new business start-ups tend to exceed market capacity, and many new businesses fail within a few years.”
“However, the results also showed that excess entry into a given market place was driven by absolute confidence, rather than confidence arising merely from comparing oneself with others. Another finding was that excess entry was much more frequent when market capacity was small, suggesting that entrepreneurs do not take sufficient account of market capacity.
“Our findings have practical implications for people starting new businesses. They should beware of overconfidence, and they should be especially wary when entering small markets or markets that seem to present easy business opportunities, because over-entry seems most likely in these circumstances.”
Ather Mirza | alfa
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
The formation of stars in distant galaxies is still largely unexplored. For the first time, astron-omers at the University of Geneva have now been able to closely observe a star system six billion light-years away. In doing so, they are confirming earlier simulations made by the University of Zurich. One special effect is made possible by the multiple reflections of images that run through the cosmos like a snake.
Today, astronomers have a pretty accurate idea of how stars were formed in the recent cosmic past. But do these laws also apply to older galaxies? For around a...
Just because someone is smart and well-motivated doesn't mean he or she can learn the visual skills needed to excel at tasks like matching fingerprints, interpreting medical X-rays, keeping track of aircraft on radar displays or forensic face matching.
That is the implication of a new study which shows for the first time that there is a broad range of differences in people's visual ability and that these...
Computer Tomography (CT) is a standard procedure in hospitals, but so far, the technology has not been suitable for imaging extremely small objects. In PNAS, a team from the Technical University of Munich (TUM) describes a Nano-CT device that creates three-dimensional x-ray images at resolutions up to 100 nanometers. The first test application: Together with colleagues from the University of Kassel and Helmholtz-Zentrum Geesthacht the researchers analyzed the locomotory system of a velvet worm.
During a CT analysis, the object under investigation is x-rayed and a detector measures the respective amount of radiation absorbed from various angles....
The quantum world is fragile; error correction codes are needed to protect the information stored in a quantum object from the deteriorating effects of noise. Quantum physicists in Innsbruck have developed a protocol to pass quantum information between differently encoded building blocks of a future quantum computer, such as processors and memories. Scientists may use this protocol in the future to build a data bus for quantum computers. The researchers have published their work in the journal Nature Communications.
Future quantum computers will be able to solve problems where conventional computers fail today. We are still far away from any large-scale implementation,...
Pillared graphene would transfer heat better if the theoretical material had a few asymmetric junctions that caused wrinkles, according to Rice University...
15.11.2017 | Event News
15.11.2017 | Event News
30.10.2017 | Event News
17.11.2017 | Physics and Astronomy
17.11.2017 | Health and Medicine
17.11.2017 | Studies and Analyses