Overconfidence linked to business failure

LEICESTER, England, May 14 (UPI) -- Businesspeople too sure of their abilities are less savvy as entrepreneurs, and this may be why many ventures fail after a few years, a Britain study said.

Psychologists say people who are so "full of themselves" and sure of their own abilities are the ones most likely to venture into markets that may be too small to accommodate another profitable business.

Dr. Briony Pulford and Andrew Colman of the University of Leicester, in collaboration with Dr. Fergus Bolger, formerly of the University of Durham, set up a "game" that simulated market conditions.

"Our results showed that, when success depended on skill, overconfidence tended to cause excess entry into a market place, as has been predicted by previous psychological theories," Pulford said in a statement.

"Market entry decisions tend to be over-optimistic, with the inevitable result that new business start-ups tend to exceed market capacity, and many new businesses fail within a few years."

The results, published in the journal Experimental Psychology, said those entering a market should beware of overconfidence, and should be especially wary when entering small markets or markets that seem to present easy business opportunities.