Wharton Research Scholars

Document Type

Journal Article

Date of this Version

May 2007

Abstract

This research examines the affect of overconfidence on the entrepreneurial investment choices of individuals. We argue that individual overconfidence is associated with more aggressive entrepreneurial investment decisions. We show that the propensity of an individual to begin startup activities is positively associated with the individual's level of overconfidence. Furthermore, overconfidence increases the likelihood of a nascent entrepreneur creating an operating business from her startup activity. These results are significant even when controlling for other known characteristics associated with the tendency to undertake entrepreneurial venturing. We investigated decisions related to venture funding and human capital investment in the venture, and investment risk but did not find that overconfidence was significantly related to these choices.

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Date Posted: 22 May 2007

This document has been peer reviewed.