Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation

Organization Science, Forthcoming

Bocconi University Management Research Paper

64 Pages Posted: 12 Jun 2020

See all articles by Mario Daniele Amore

Mario Daniele Amore

Bocconi University - Department of Management and Technology; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Orsola Garofalo

Copenhagen Business School

Victor Martin-Sanchez

University of Southern Denmark

Date Written: April 10, 2020

Abstract

Extant research shows that entrepreneurs are typically overly optimistic about their ventures’ prospects, and that such optimism hampers performance. We analyze how dispositional optimism affects the adjustments to entrepreneurs’ expectations after they receive negative feedback on their task performance. We then explore the relationship between optimism and the effectiveness of innovation. Exploiting unique firm-level data and a laboratory experiment involving 205 entrepreneurs, we find that dispositional optimism is negatively associated with both the likelihood and extent of belief updating in response to negative feedback. Furthermore, dispositional optimism triggers a discrepancy – between innovation inputs and outputs – that reduces a firm’s innovation effectiveness.

Keywords: dispositional optimism, belief updating, entrepreneurship, negative feedback, innovation

Suggested Citation

Amore, Mario Daniele and Garofalo, Orsola and Martin-Sanchez, Victor, Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation (April 10, 2020). Organization Science, Forthcoming, Bocconi University Management Research Paper , Available at SSRN: https://ssrn.com/abstract=3623735

Mario Daniele Amore (Contact Author)

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Orsola Garofalo

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Victor Martin-Sanchez

University of Southern Denmark ( email )

Campusvej 55
DK-5230 Odense, 5000
Denmark

HOME PAGE: http://www.victormartinsanchez.com

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