Skip to main content Accessibility help
×
Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-06T14:58:15.654Z Has data issue: false hasContentIssue false

4 - Rational entrepreneurs or optimistic martyrs? Some considerations on technological regimes, corporate entries, and the evolutionary role of decision biases

Published online by Cambridge University Press:  07 October 2011

Giovanni Dosi
Affiliation:
University of Rome, “La Sapienza,” Rome, Italy
Dan Lovallo
Affiliation:
University of Pennsylvania, Philadelphia, PA
Raghu Garud
Affiliation:
New York University
Praveen Rattan Nayyar
Affiliation:
New York University
Zur Baruch Shapira
Affiliation:
New York University
Get access

Summary

Introduction

This is a rather conjectural report on the evolutionary role of decision biases— at both the level of individuals and of organizations—and, in particular, on their importance to the processes of corporate entry and the evolution of industrial structures. A growing and quite robust body of evidence highlights the pervasiveness of various types of biases in individual decision making, which accounts for systematic departures from predictions of the canonical model of rational choice (see, for example, Kahneman & Tversky, 1973, 1986, Shafir & Tversky, 1992). For our purposes, we will mainly concern ourselves with overconfidence or optimism, which frequently leads to bold forecasts of the consequences of one's own actions. Also, by way of example, we will examine risk seeking in the domain of losses, which often yields escalating commitments in the face of failures. Interestingly, these biases appear to carry over from the level of individuals to that of groups and organizations and, indeed, might even be amplified in the latter circumstances (see, for example, Kahneman & Lovallo, 1993, Lovallo, 1996a, and the literature discussed there). In this respect, a challenging domain of investigation – with vast ramifications into the analyses of the nature of entrepreneurship, technological change, and industrial dynamics – is that of corporate entry into an industry.

Type
Chapter
Information
Technological Innovation
Oversights and Foresights
, pp. 41 - 68
Publisher: Cambridge University Press
Print publication year: 1997

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×