Failing to Learn from Failure: How Optimism Impedes Entrepreneurial Innovation (WITHDRAWN)

Extant research shows that entrepreneurs are typically too optimistic about their ventures’ prospects and that this optimism hampers performance. We account for the underlying cognitive mechanisms by (i) analyzing how dispositional optimism shapes the updating of entrepreneurs’ expectations about their performance after receiving a feedback, and (ii) exploring the relation between optimism and effectiveness of innovation. We use unique archival data combined with a laboratory experiment involving 100 entrepreneurs. Our evidence indicates that dispositional optimism impairs belief updating in response to negative feedback. Moreover, dispositional optimism triggers a discrepancy – between inputs and innovation outputs – that reduces a firm’s innovation effectiveness.