International Academic Journal of Entrepreneurship

Motivated Attribution and Entrepreneurial Confidence

*Herna´n Ruffo
Department Economics, Torcuato Di Tella University, Argentina , Argentina

*Corresponding Author:
Herna´n Ruffo
Department Economics, Torcuato Di Tella University, Argentina , Argentina
Email:hruffo@utdt.edu

Published on: 2019-04-11

Abstract

In this paper, we argue that entrepreneurial overconfidence can be the result of pursuing self-motivation rather than a cognitive bias to be corrected, and we propose a particular mechanism for this process. Through a model of motivated attribution, we analyze the problem of agents who can use causal attribution to explain away bad signals about their ability to preserve self-confidence and commit to effort. This behavior can result in individuals reporting the receipt of past signals in an unbiased way while maintaining biased beliefs about their self-abilities. We provide testable implications of our model.

Keywords

Entrepreneurship; Overconfidence; Motivated beliefs; JEL classification: D82; D83

Introduction

It is commonly accepted in the social psychology literature that when most people self- evaluate in any desirable dimension they rank themselves above average. Specifically, when a population is asked in a survey or experiment to rank themselves relative to others on some desirable attribute, an effect of “better than average” is observed, as a majority of subjects consider themselves as more skillful or talented than the average and more than half of respondents consider themselves better than the median of the same population. This phenomenon is known as over confidence [1].