Great expectations? Insights into UK SMEs’ optimism from the inside and outside view

Do, Hang and Hand, Chris (2023) Great expectations? Insights into UK SMEs’ optimism from the inside and outside view. Academy of Management Proceedings, 2023 (1).

Record type: Meeting abstract

Abstract

Entrepreneurial optimism has generated academic interest in the last two decades, drawing on research on biases in human cognition, in particular the inside view (i.e. focussing on the specifics of the case) and the outside view (i.e. based on the outcomes of other similar cases). Inside view thinking is associated with more optimistic (and over optimistic) expectations than outside view thinking. Our study links these notions to determinants of the expected firm growth. Drawing on a sample of 12,273 UK small and medium sized enterprises (SMEs), we found evidence for both inside view and outside view thinking influencing expectations of the future. Our findings suggest that the innovation novelty, firm characteristics and behaviour, and network have an impact on the expected returns, whereas business planning has no effect. The reflection from the inside or outside view based on the information perceived is also likely to drive the impact of these factors on the expected growth. Additionally, we find some indirect evidence of learning from experience insofar as firm age moderates some of these effects.

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