Abstract
Research on CEO overconfidence establishes its important effects on organizational strategy and performance. It can lead CEOs to overestimate their firm's capabilities and inaccurately assess the risk of new actions. Due to these effects, we argue that in need of the access to external knowledge, CEOs exhibiting greater overconfidence are more likely to pursue alliances. We also contribute to this ongoing conversation by linking CEO overconfidence to the suboptimal selection of alliance partners in the pursuit of external knowledge. Specifically, we demonstrate how greater overconfidence leads CEOs to discount organizational characteristics that have been shown to be beneficial in the alliance literature—greater knowledge base, knowledge impact, technology experience, and their own firm's knowledge dependence on potential alliance partners. With empirical tests of a broad sample of firms in healthcare-related industries tracked from 2001 to 2021, our work helps to integrate concepts of CEO overconfidence with the dynamics of partner selection in the knowledge and innovation domain.
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