Optimism and Overconfidence of Strategic Decision Makers-Comparing Entrepreneurs and Managers With Employees

Empirical evidence supports the conventional wisdom that entrepreneurs are more optimistic and overconfident than others. However, the same holds true for (top) managers. In a large incentivized survey (), we directly compare entrepreneurs, managers, and employees on a comprehensive set of measures of optimism and overconfidence. We find that on average entrepreneurs and managers are more optimistic than employees in their dispositional optimism and their explanatory style of past events. However, they do not differ from each other in these respects. For two incentivized measures of overconfidence, we also find no differences between entrepreneurs and managers. Both are equally likely to overestimate their own abilities compared to employees. In terms of overestimating general economic prospects differences with employees are much less pronounced. Exploration of within-group heterogeneities shows that these observations hold true for various subgroups of entrepreneurs and managers. Together these findings tentatively suggest that optimism and overconfidence characterize strategic decision makers more generally, irrespective of whether they bear the full risk of their strategic decisions.