How Do Judgmental Overconfidence and Overoptimism Shape Innovative Activity?

39 Pages Posted: 6 Feb 2013

See all articles by Holger Herz

Holger Herz

University of Fribourg - Department of Economics

Daniel Schunk

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management; University of Zurich - Department of Economics

Christian Zehnder

University of Lausanne

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2013

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 leads to an innovation enhancing effect, judgmental overconfidence inhibits 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.

Keywords: innovation, entrepreneurship, overconfidence, experiment

JEL Classification: C920, D830, D230

Suggested Citation

Herz, Holger and Schunk, Daniel and Zehnder, Christian, How Do Judgmental Overconfidence and Overoptimism Shape Innovative Activity? (January 31, 2013). CESifo Working Paper Series No. 4084. Available at SSRN: https://ssrn.com/abstract=2212050

Holger Herz

University of Fribourg - Department of Economics ( email )

Fribourg
Switzerland

Daniel Schunk (Contact Author)

Johannes Gutenberg University Mainz - Gutenberg School of Economics and Management ( email )

Mainz
Germany

University of Zurich - Department of Economics ( email )

Bluemlisalpstr. 10
Zurich, 8006
Switzerland

Christian Zehnder

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
39
Abstract Views
481
PlumX Metrics