The latest study from the American Finance Association’s Journal of Finance reaches a counterintuitive conclusion: perhaps over-confident CEOs are better innovators. Here’s what it says:
CEO overconfidence is associated with riskier projects, greater investment in innovation, and greater total quantity of innovation as measured by patent applications and patent citations even after controlling for the amount of R&D expenditure. In other words, the R&D investments of overconfident CEOs are more productive in generating innovation [my emphasis].
David Hirshleifer, Angie Low and Siew Hong Teoh rightly point out that this may go against the grain for most business commentators (myself included), who “often point to examples of headstrong, overconfident CEOs who made disastrous decisions”.



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