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When It's Right to Be "Wrong": The Effects of Overconfidence and Planning on Product Performance in a Dynamic Environment

Year: 2011

Type: article

Abstract: Some authors emphasize overconfidence may benefit managers by increasing decision-making efficiency, whereas others argue it results in serious errors. This study helps resolve the debate by examining the relationship between overconfidence and product performance, as well as testing whether planning might mediate the link. The study sampled 52 small computer companies that had decided to introduce a product. It examined the manager's overconfidence and planning when the product was launched and measured the product's performance 18 months later. We found that overconfidence decreased planning, planning decreased performance, and, as hypothesized, planning mediated the relationship between the two other variables. By examining the meditating role of planning, we were able to better identify the causal relationships and clarify the effects of overconfidence.

Source: Journal of Small Business Strategy

Authors: Mark Simon, John Kim, Susan M. Houghton, Xiaodong Deng

Institutions: Oakland University, North Carolina Agricultural and Technical State University

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: diamond

OpenAlex ID: W759469478

FWCI:

Cites: 69

Cited by: 5

Related to: 10