Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Businesspeople who are too sure of their abilities are less savvy entrepreneurs: new study

14.05.2008
Apprentice-style entrepreneurs who have an inflated sense of their own abilities may jump into new business ventures with insufficient regard for the competition and the size of the market, new research has found.

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
Further information:
http://www.esrcsocietytoday.ac.uk

More articles from Business and Finance:

nachricht Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Explosion on Jupiter-sized star 10 times more powerful than ever seen on our sun

A stellar flare 10 times more powerful than anything seen on our sun has burst from an ultracool star almost the same size as Jupiter

  • Coolest and smallest star to produce a superflare found
  • Star is a tenth of the radius of our Sun
  • Researchers led by University of Warwick could only see...

Im Focus: Quantum simulation more stable than expected

A localization phenomenon boosts the accuracy of solving quantum many-body problems with quantum computers which are otherwise challenging for conventional computers. This brings such digital quantum simulation within reach on quantum devices available today.

Quantum computers promise to solve certain computational problems exponentially faster than any classical machine. “A particularly promising application is the...

Im Focus: Largest, fastest array of microscopic 'traffic cops' for optical communications

The technology could revolutionize how information travels through data centers and artificial intelligence networks

Engineers at the University of California, Berkeley have built a new photonic switch that can control the direction of light passing through optical fibers...

Im Focus: A long-distance relationship in femtoseconds

Physicists observe how electron-hole pairs drift apart at ultrafast speed, but still remain strongly bound.

Modern electronics relies on ultrafast charge motion on ever shorter length scales. Physicists from Regensburg and Gothenburg have now succeeded in resolving a...

Im Focus: Researchers 3D print metamaterials with novel optical properties

Engineers create novel optical devices, including a moth eye-inspired omnidirectional microwave antenna

A team of engineers at Tufts University has developed a series of 3D printed metamaterials with unique microwave or optical properties that go beyond what is...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Revered mathematicians and computer scientists converge with 200 young researchers in Heidelberg!

17.04.2019 | Event News

First dust conference in the Central Asian part of the earth’s dust belt

15.04.2019 | Event News

Fraunhofer FHR at the IEEE Radar Conference 2019 in Boston, USA

09.04.2019 | Event News

 
Latest News

New automated biological-sample analysis systems to accelerate disease detection

18.04.2019 | Life Sciences

Explosion on Jupiter-sized star 10 times more powerful than ever seen on our sun

18.04.2019 | Physics and Astronomy

New eDNA technology used to quickly assess coral reefs

18.04.2019 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>