Abstract
Cognitive biases have recently received enormous attention from entrepreneurship scholars. A growing number of studies have particularly focused on the role of overconfidence in the entrepreneurship decision-making literature. However, it remains unclear ‘how’ entrepreneurial risk behavior is influenced by overconfidence. Building on both information-processing theory and upper echelons theory, we propose two mechanisms that mediate the relationship between overconfidence and risk behavior: the cognitive process of risk perception (‘what entrepreneurs see’) and the personality trait of risk propensity (‘who entrepreneurs are’). By aggregating over 25 years of research with the help of meta-analytical structural equation modeling (MASEM), our results reveal a full mediation through risk perception and risk propensity. Interestingly, overconfident entrepreneurs tend to engage in risk behavior particularly because they do not perceive (or ‘see’) them as such. Our study thus contributes to prior research by uncovering two mechanisms that help to better understand entrepreneurial risk behavior.
Published Version
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