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How do judgmental overconfidence and overoptimism shape innovative activity?


Herz, Holger; Schunk, Daniel; Zehnder, Christian (2013). How do judgmental overconfidence and overoptimism shape innovative activity? Working paper series / Department of Economics 106, University of Zurich.

Abstract

Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on innovative activity. While overoptimism is positively associated with innovation, judgmental overconfidence is negatively linked to innovation. Our results indicate that future research is well advised to take into account that the relationship between innovation and overconfidence may crucially depend on what type of overconfidence is most prevalent in a particular context.

Abstract

Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on innovative activity. While overoptimism is positively associated with innovation, judgmental overconfidence is negatively linked to innovation. Our results indicate that future research is well advised to take into account that the relationship between innovation and overconfidence may crucially depend on what type of overconfidence is most prevalent in a particular context.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C92, D83, D23
Uncontrolled Keywords:Innovation, Entrepreneurship, Overconfidence, Experiment
Language:English
Date:November 2013
Deposited On:09 Jan 2013 16:16
Last Modified:13 Aug 2017 21:45
Series Name:Working paper series / Department of Economics
Number of Pages:42
ISSN:1664-7041
Additional Information:Revised version
Official URL:http://www.econ.uzh.ch/static/wp/econwp106.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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