Hubristic Entrepreneurial Leadership: Targets, Interpretation and Reaction to Performance.

Abstract

As a cognitive bias, hubris leads entrepreneurs to overestimate both the likelihood of success and the contribution of firms’ resources to their success. Accordingly, in this chapter, we investigate how entrepreneurs’ hubris influences strategy formulation, performance attribution and responses to performance outcomes. We posit that heightened levels of hubris in entrepreneurs diminish the significance of external performance in shaping strategy while amplifying the importance of relative performance. When evaluating performance, hubris plays a pivotal role: elevated levels of hubris lead entrepreneurs to attribute positive outcomes to themselves while shifting blame for negative outcomes onto external factors and others. In addition, we recognise that heightened hubris intensifies the commitment to chosen strategies, potentially escalating their pursuit despite adverse circumstances. In disentangling the effect of hubris bias in defining and interpreting firm performance, this chapter assists entrepreneurs in making more conscious and informed decisions.