Wisdom or Hubris? Differences in the Three Dimensions of Overconfidence Across Entrepreneurial Experience.
(2026) ENTN19 20261Department of Business Administration
- Abstract
- People keep starting businesses despite the high probability of failure. This paradox is often
blamed on overconfidence, but existing research tends to confound different dimensions of
overconfidence into a single, blurry bias.
This thesis separates overconfidence into its three distinct dimensions: overestimation,
overplacement, and overprecision. The goal is to see if having prior entrepreneurial experience
makes you more or less overconfident than those founding a new business without prior
experience. Therefore, this study aims to answer the question: how do the three dimensions of
overconfidence differ between inexperienced and experienced entrepreneurs?
Using a quantitative, cross-sectional research design, data was collected... (More) - People keep starting businesses despite the high probability of failure. This paradox is often
blamed on overconfidence, but existing research tends to confound different dimensions of
overconfidence into a single, blurry bias.
This thesis separates overconfidence into its three distinct dimensions: overestimation,
overplacement, and overprecision. The goal is to see if having prior entrepreneurial experience
makes you more or less overconfident than those founding a new business without prior
experience. Therefore, this study aims to answer the question: how do the three dimensions of
overconfidence differ between inexperienced and experienced entrepreneurs?
Using a quantitative, cross-sectional research design, data was collected from 56 entrepreneurs
(n=22 inexperienced; n=34 experienced). Participants completed a general knowledge trivia
quiz designed to measure the three dimensions of overconfidence through self-assessment and
performance-based tasks. Statistical analysis was conducted using the Fisher-Freeman-Halton
exact test to accommodate the relatively small sample size.
The findings reveal that none of the three hypotheses were supported at the .05 significance
level. However, several critical insights emerged. The results for overestimation were nearly
significant, suggesting that experience helps a person calibrate their expectations over time.
However, a bigger sample is needed to confirm this. On the other hand, we measured a massive
amount of underplacement. Nearly 80% of the founders thought they were worse than the
average previous participant. This seems to be a case of the hard-easy effect, where a difficult
task makes even the most confident person doubt their relative standing compared to others.
Lastly, we observed remarkably high overprecision. Almost everyone in the sample, from
inexperienced to experienced entrepreneurs, showed a high level of certainty in their own
accuracy. This suggests that certain types of overconfidence might not be a bias that experience
fixes, but rather a stable trait that helps people deal with the ambiguity of starting a company.
Ultimately, our work highlights why we should stop treating overconfidence as a single
construct if we want to understand the biases that lead to both entrepreneurial entry and failure. (Less) - Popular Abstract
- People keep starting businesses despite the high probability of failure. This paradox is often
blamed on overconfidence, but existing research tends to confound different dimensions of
overconfidence into a single, blurry bias.
This thesis separates overconfidence into its three distinct dimensions: overestimation,
overplacement, and overprecision. The goal is to see if having prior entrepreneurial experience
makes you more or less overconfident than those founding a new business without prior
experience. Therefore, this study aims to answer the question: how do the three dimensions of
overconfidence differ between inexperienced and experienced entrepreneurs?
Using a quantitative, cross-sectional research design, data was collected... (More) - People keep starting businesses despite the high probability of failure. This paradox is often
blamed on overconfidence, but existing research tends to confound different dimensions of
overconfidence into a single, blurry bias.
This thesis separates overconfidence into its three distinct dimensions: overestimation,
overplacement, and overprecision. The goal is to see if having prior entrepreneurial experience
makes you more or less overconfident than those founding a new business without prior
experience. Therefore, this study aims to answer the question: how do the three dimensions of
overconfidence differ between inexperienced and experienced entrepreneurs?
Using a quantitative, cross-sectional research design, data was collected from 56 entrepreneurs
(n=22 inexperienced; n=34 experienced). Participants completed a general knowledge trivia
quiz designed to measure the three dimensions of overconfidence through self-assessment and
performance-based tasks. Statistical analysis was conducted using the Fisher-Freeman-Halton
exact test to accommodate the relatively small sample size.
The findings reveal that none of the three hypotheses were supported at the .05 significance
level. However, several critical insights emerged. The results for overestimation were nearly
significant, suggesting that experience helps a person calibrate their expectations over time.
However, a bigger sample is needed to confirm this. On the other hand, we measured a massive
amount of underplacement. Nearly 80% of the founders thought they were worse than the
average previous participant. This seems to be a case of the hard-easy effect, where a difficult
task makes even the most confident person doubt their relative standing compared to others.
Lastly, we observed remarkably high overprecision. Almost everyone in the sample, from
inexperienced to experienced entrepreneurs, showed a high level of certainty in their own
accuracy. This suggests that certain types of overconfidence might not be a bias that experience
fixes, but rather a stable trait that helps people deal with the ambiguity of starting a company.
Ultimately, our work highlights why we should stop treating overconfidence as a single
construct if we want to understand the biases that lead to both entrepreneurial entry and failure. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/student-papers/record/9246210
- author
- Timmermans, Victor Martijn LU and Ritsvall, Viktor LU
- supervisor
- organization
- course
- ENTN19 20261
- year
- 2026
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Overconfidence, overestimation, overprecision, overplacement, hard-easy effect, calibration, locus of control, hubris theory, experience.
- language
- English
- id
- 9246210
- date added to LUP
- 2026-07-20 17:29:15
- date last changed
- 2026-07-20 17:29:15
@misc{9246210,
abstract = {{People keep starting businesses despite the high probability of failure. This paradox is often
blamed on overconfidence, but existing research tends to confound different dimensions of
overconfidence into a single, blurry bias.
This thesis separates overconfidence into its three distinct dimensions: overestimation,
overplacement, and overprecision. The goal is to see if having prior entrepreneurial experience
makes you more or less overconfident than those founding a new business without prior
experience. Therefore, this study aims to answer the question: how do the three dimensions of
overconfidence differ between inexperienced and experienced entrepreneurs?
Using a quantitative, cross-sectional research design, data was collected from 56 entrepreneurs
(n=22 inexperienced; n=34 experienced). Participants completed a general knowledge trivia
quiz designed to measure the three dimensions of overconfidence through self-assessment and
performance-based tasks. Statistical analysis was conducted using the Fisher-Freeman-Halton
exact test to accommodate the relatively small sample size.
The findings reveal that none of the three hypotheses were supported at the .05 significance
level. However, several critical insights emerged. The results for overestimation were nearly
significant, suggesting that experience helps a person calibrate their expectations over time.
However, a bigger sample is needed to confirm this. On the other hand, we measured a massive
amount of underplacement. Nearly 80% of the founders thought they were worse than the
average previous participant. This seems to be a case of the hard-easy effect, where a difficult
task makes even the most confident person doubt their relative standing compared to others.
Lastly, we observed remarkably high overprecision. Almost everyone in the sample, from
inexperienced to experienced entrepreneurs, showed a high level of certainty in their own
accuracy. This suggests that certain types of overconfidence might not be a bias that experience
fixes, but rather a stable trait that helps people deal with the ambiguity of starting a company.
Ultimately, our work highlights why we should stop treating overconfidence as a single
construct if we want to understand the biases that lead to both entrepreneurial entry and failure.}},
author = {{Timmermans, Victor Martijn and Ritsvall, Viktor}},
language = {{eng}},
note = {{Student Paper}},
title = {{Wisdom or Hubris? Differences in the Three Dimensions of Overconfidence Across Entrepreneurial Experience.}},
year = {{2026}},
}