Unraveling the mystery: exploring managers' attraction to excessive markets and investigating behavioral biases in market entry decisions

PurposeThe purpose of this study is to address why managers enter the excessive market. A comparison of the facts and perceptions of entrants relative to success in the market shows that many entrants are confident about the viability of their businesses and enter the market. Accordingly, the author...

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Bibliographic Details
Published in:Journal of strategy and management 2024-05, Vol.17 (2), p.260-281
Main Authors: Soleymanzadeh, Omid, Hajipour, Bahman
Format: Article
Language:English
Subjects:
Bias
Brand loyalty
Competition
Competitive advantage
Decision making
Decisions
Entrepreneurs
Entrepreneurship
Expected values
Hypotheses
Managers
Market entry
Research methodology
Signal detection
Simulation
Simulation models
Startups
Strategic management
Success
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Summary:PurposeThe purpose of this study is to address why managers enter the excessive market. A comparison of the facts and perceptions of entrants relative to success in the market shows that many entrants are confident about the viability of their businesses and enter the market. Accordingly, the authors simulate market entry decisions to detect behavioral biases.Design/methodology/approachThe authors adapted the entry decisions simulation method, which is supported by the theoretical foundations of signal detection theory (SDT) and signaling theory. The simulation model is implemented on the Anaconda platform and written in Python 3.FindingsThe results of this study suggest that overestimation relates to excess market entry. Also, the proportion of excess entry under difficult conditions is always higher than under easy conditions.Practical implicationsThis research helps managers and firms think about their and their competitors' abilities and evaluate them before entering the market. Policymakers and practitioners can also design programs such as experiential learning to help entrants assess their skills.Originality/valueSo far, no research has investigated the role of overconfidence under different market conditions. Accordingly, this study contributes to the current market entry literature by disentangling the debate between absolute and relative confidence and by considering the role of task difficulty.
ISSN:1755-425X
1755-4268
DOI:10.1108/JSMA-08-2023-0230