How to Turn Crises into Opportunities? The Effect of Uncertainty on Entrepreneurial Overconfidence

Анотація

Crises such as the COVID-19 pandemic and the Ukraine war have destabilized company operations and created deep uncertainty for entrepreneurs. Previous research has primarily found a negative effect of uncertainty on entrepreneurial activities. This paper investigates whether the uncertainty instigated by the crises may have a positive effect on entrepreneurial intentions through overconfidence. We argue that uncertainty and difficulty in predicting how the world develops during crises generate cognitive dissonance for entrepreneurs, who may increase their confidence in their knowledge, resulting in overconfidence. An experiment with 106 entrepreneurs in the Greater China region during COVID and a survey with 224 entrepreneurs in Ukraine show that uncertainty increases overconfidence, which is further associated with their intentions to continue the existing business and enter new businesses. The findings have important implications for situational influence on overconfidence and how overconfidence plays a role in addressing the uncertainty instigated by crises.

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