Entrepreneurial failure: Statistical and psychological explanations

Strategic Management Journal

Volumn 37, Issue 6, 2016, Pages 1047-1064

  Artinger, Sabrina ^a   Powell, Thomas C ^b  

^a MAX PLANCK INSTITUTE FOR HUMAN DEVELOPMENT   (Germany)

^b UNIVERSITY OF OXFORD   (United Kingdom)

Author keywords

behavioral strategy; decision making; entrepreneurship; excess entry; overconfidence

Indexed keywords

BEHAVIORAL RESEARCH; COMMERCE; DECISION MAKING; ERRORS; INVESTMENTS; PLANT SHUTDOWNS; STATISTICS;

BEHAVIORAL STRATEGY; BUSINESS OPPORTUNITIES; ENTREPRENEURIAL FAILURES; ENTREPRENEURSHIP; EXCESS ENTRY; OVERCONFIDENCE; PSYCHOLOGICAL EXPLANATION; STATISTICAL HYPOTHESIS;

RANDOM ERRORS;

EID: 84930531474     PISSN: 01432095     EISSN: 10970266     Source Type: Journal    
DOI: 10.1002/smj.2378     Document Type: Article

References (54)

1. Bain JS,. 1956. Barriers to New Competition: Their Character and Consequences in Manufacturing Industries. Harvard University Press: Cambridge, MA.
2. Barber BM, Odean T,. 2001. Boys will be boys: gender, overconfidence, and common stock investment. Quarterly Journal of Economics 116 (1): 261-292.
3. Bartolet D, Fox CR, Lovallo D,. 2011. Corporate capital allocation: a behavioral perspective. Strategic Management Journal 32: 1465-1483.
4. Bolger F, Pulford BD, Colman AM,. 2008. Market entry decisions: effects of absolute and relative confidence. Experimental Psychology 55: 113-120.
5. Busenitz LW,. 1999. Entrepreneurial risk and strategic decision making: it's a matter of perspective. Journal of Applied Behavioral Science 35 (3): 325-340.
6. Cain DM, Moore DA, Haran U,. 2015. Making sense of overconfidence in market entry. Strategic Management Journal 36 (1): 1-18.
7. Camerer C, Ho TH, Chong JK,. 2004. A cognitive hierarchy model of games. Quarterly Journal of Economics 119 (3): 861-898.
8. Camerer C, Lovallo D,. 1999. Overconfidence and excess entry: an experimental approach. American Economic Review 89: 306-318.
9. Fischbacher U,. 2007. Z-Tree: Zurich toolbox for ready-made economic experiments. Experimental Economics 10: 171-178.
10. Fox CR, Tversky A,. 1995. Ambiguity aversion and comparative ignorance. Quarterly Journal of Economics 110: 585-603.
11. Fudenberg D, Tirole J,. 1991. Game Theory. MIT Press: Cambridge, MA.
12. Gary MS, Wood RE, Pillinger T,. 2012. Enhancing mental models, analogical transfer, and performance in strategic decision making. Strategic Management Journal 33 (11): 1229-1246.
13. Gavetti G,. 2012. Toward a behavioral theory of strategy. Organization Science 23 (1): 267-285.
14. Goodwin P, Wright G,. 2001. Enhancing strategy evaluation in scenario planning: a role for decision analysis. Journal of Management Studies 38 (1): 1-16.
15. Greenwood R, Hanson SG,. 2015. Waves in ship prices and investment. Quarterly Journal of Economics 130 (1): 55-109.
16. Greiner B., 2004. The online recruitment system orsee 2.0-a guide for the organization of experiments in economics, Working Paper Series in Economics 10, Department of Economics, University of Cologne.
17. Hall RE, Woodward SE,. 2010. The burden of the nondiversifiable risk of entrepreneurship. American Economic Review 100: 1163-1194.
18. Harrison JR, March JG,. 1984. Decision making and post decision surprises. Administrative Science Quarterly 29: 26-42.
19. Heath C, Larrick RP, Klayman J,. 1998. Cognitive repairs: how organizations compensate for the shortcomings of individual learners. Research in Organizational Behavior 20: 1-37.
20. Heath C, Tversky A,. 1991. Preference and belief: ambiguity and competence in choice under uncertainty. Journal of Risk and Uncertainty 4 (1): 5-28.
21. Hogarth RM, Karelaia N,. 2012. Entrepreneurial success and failure: confidence and fallible judgment. Organization Science 23 (6): 1733-1747.
22. Holt CA, Laury SK,. 2002. Risk version and incentive effects. American Economic Review 92: 1644-1655.
23. Kahneman D,. 1988. Experimental economics: a psychological perspective. In Bounded Rational Behavior in Experimental Games and Markets, Tietz R, Albers W, Selten R, (eds). Springer: New York; 11-18.
24. Kahneman D, Lovallo D,. 1993. Timid choices and bold forecasts: a cognitive perspective on risk taking. Management Science 39 (1): 17-31.
25. Laureiro-Martinez D, Brusoni S, Canessa N, Zollo M,. 2015. Understanding the exploration-exploitation dilemma: An fMRI study of attention control and decision-making performance. Strategic Management Journal 36 (3): 319-338.
26. Levinthal DA,. 2011. A behavioral approach to strategy-What's the alternative? Strategic Management Journal 32: 1517-1523.
27. Lieberman MB, Montgomery DB,. 1988. First-mover advantage. Strategic Management Journal, Summer Special Issue 9: 41-58.
28. Lovallo D, Clarke C, Camerer C,. 2012. Robust analogizing and the outside view: two empirical tests of case-based decision making. Strategic Management Journal 33 (5): 496-512.
29. Markle AB,. 2011. Dysfunctional learning in decision processes: the case of employee reciprocity. Strategic Management Journal 32: 1411-1425.
30. Meyer KE, Estrin S, Bhaumik SK, Peng MW,. 2009. Institutions, resources and entry strategies in emerging economies. Strategic Management Journal 30 (1): 61-80.
31. Moore DA, Oesch JM, Zietsma C,. 2007. What competition? Myopic self-focus in market-entry decisions. Organization Science 18 (3): 440-454.
32. Niederle M, Vesterlund L,. 2007. Do women shy away from competition? Do men compete too much? Quarterly Journal of Economics 122 (3): 1067-1101.
33. Porter ME,. 1980. Competitive Strategy. Free Press: New York.
34. Powell TC,. 2011. Neurostrategy. Strategic Management Journal 32: 1484-1499.
35. Powell TC,. 2014. Strategic management and the person. Strategic Organization 12: 200-207.
36. Powell TC, Lovallo D, Fox C,. 2011. Behavioral strategy. Strategic Management Journal 32: 1369-1386.
37. Rapoport A, Seale DA, Erev I, Sundali JA,. 1998. Equilibrium play in large group market entry games. Management Science 44 (1): 129-141.
38. Ritholtz B., 2012. Small business success/failure rates. The Big Picture 4 January 2012. Available at: http://www.ritholtz.com/blog/2012/01/small-business-successfailure-rates/ (accessed 20 November 2013).
39. Rothbart M, Snyder M,. 1970. Confidence in the prediction and postdiction of an uncertain outcome. Canadian Journal of Behavioral Science 2: 38-43.
40. Rumelt RP,. 1984. Towards a strategic theory of the firm. In Competitive Strategic Management, Lamb RB, (ed). Prentice-Hall: Englewood Cliffs, NJ; 556-570.
41. Scherer FM,. 1980. Industrial Market Structure and Economic Performance (2nd edn). Houghton Mifflin: Boston, MA.
42. Shane S., 2009. Failure is a constant in entrepreneurship. The New York Times 15 July 2009. Available at: http://boss.blogs.nytimes.com/2009/07/15/ (accessed 7 May 2015).
43. Shane S., 2012. Start-up failure rates: the definitive numbers. Small Business Trends 17 December 2012. Available at: http://smallbiztrends.com/2012/12/.
44. Simonsohn U,. 2010. EBay's crowded evenings: competition neglect in market entry decisions. Management Science 56 (7): 1060-1073.
45. Sterman J,. 2000. Business Dynamics: Systems Thinking and Modeling for a Complex World. McGraw-Hill: New York.
46. Stout A., 2012. The UK start-up economy in numbers: November, 2012. UK Start-up Economy 20 November 2012. Available at: http://www.insidestartups.co.uk/blog/ (accessed 20 November 2013).
47. Sundali J, Rapoport A, Seale DA,. 1995. Coordination in market entry games with symmetric players. Organizational Behavior and Human Decision Processes 64 (2): 203-218.
48. Teece DJ,. 1980. Economics of scope and the scope of the enterprise. Journal of Economic Behavior and Organization 1: 223-247.
49. Teece DJ,. 1984. Economic analysis and strategic management. California Management Review 25: 87-110.
50. Thaler RH, Sunstein CR,. 2008. Nudge: Improving Decisions about Health, Wealth, and Happiness. Yale University Press: New Haven, CT.
51. Wernerfelt B,. 1984. A resource-based view of the firm. Strategic Management Journal 5 (2): 171-180.
52. Wu B, Knott AM,. 2006. Entrepreneurial risk and market entry. Management Science 52 (9): 1315-1330.
53. Zac PJ, Denzau A,. 2001. Economics is an evolutionary science. In Evolutionary Approaches in the Behavioral Sciences: Toward a Better Understanding of Human Nature, Somit A, Peterson S, (eds). JAI Press: Greenwich, CT; 31-65.
54. Zajac EJ, Bazerman MH,. 1991. Blind spots in industry and competitor analysis: implications of interfirm (mis)perceptions for strategic decisions. Academy of Management Review 16 (1): 37-56.