Overconfidence, misjudgment, and entry in experimental entrepreneurial markets: evidence from Panama

This paper investigates the influence of overconfidence and misjudgement of merit on the decision to enter a winner-take-all market. Through a lab-in-the-field experiment conducted in Panama's dynamic and diverse entrepreneurial ecosystem, the study addresses a research gap by exploring the int...

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Bibliographic Details
Published inEntrepreneurship and regional development Vol. 36; no. 5-6; pp. 816 - 832
Main Author Rotondi, Valentina
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 26.05.2024
Taylor & Francis Ltd
Subjects
Behavioral economics
Confidence
Decision making
Destructiveness
development
Entrepreneurs
Entrepreneurship
Inequality
institutions
lab-in-the-field experiment
Market entry
Overconfidence
Ventures
Panama
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Summary:This paper investigates the influence of overconfidence and misjudgement of merit on the decision to enter a winner-take-all market. Through a lab-in-the-field experiment conducted in Panama's dynamic and diverse entrepreneurial ecosystem, the study addresses a research gap by exploring the interplay between overconfidence, institutional factors, and entrepreneurial activities. The findings confirm the role of overconfidence as a determinant of market entry and reveal that overconfidence primarily empowers individuals already embedded in entrepreneurial net- works, regardless of their destructiveness. These results suggest that in the presence of weak institutions, overconfidence does not promote entrepreneurship but rather motivates those with pre-existing entrepreneurial networks to open new ventures. However, this situation has the potential to exacerbate inequalities, especially if these ventures make only marginal contributions to overall social output.
ISSN:0898-5626
1464-5114
DOI:10.1080/08985626.2023.2241851