Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation

Mario Daniele Amore*, Orsola Garofalo*, Victor Martin-Sanchez*

*Corresponding author for this work

Research output: Contribution to journalJournal articlepeer-review

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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.
Original languageEnglish
JournalOrganization Science
Volume32
Issue number4
Pages (from-to)940-964
Number of pages25
ISSN1047-7039
DOIs
Publication statusPublished - Jul 2021

Bibliographical note

Published online: 7. December 2020

Keywords

  • Dispositional optimism
  • Belief updating
  • Entrepreneurship
  • Negative feedback
  • Innovation

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