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Chapter 24: (Un) Great Expectations: Effects of Underestimations and Self-perception on Performance
24 (Un) great expectations: eﬀects of underestimations and self-perception on performance Rodolphe Durand Introduction While foresight permeates everyday strategic activity, it remains quite ignored by strategy research. More than 10 years ago, Starbuck and Mezias pleaded diligently for further research on the relationships between ﬁrms’ estimation accuracy and performance: To ﬁnd out whether [perceptions are accurate or not], researchers need to investigate the larger or smaller errors and diﬀerent biases. Nevertheless, surprisingly little research focuses on the accuracies of perceptions. Studies comparing subjective with objective data may be rare because it is so diﬃcult to design good questionnaires, to obtain good ‘objective’ data and to obtain enough suitable respondents. (1996: 115). Since then, some studies have assessed the reasons and strategic consequences of an absence of foresight, through the study of the relationships between overconﬁdence (optimistic errors) and strategic actions (Hayward and Hambrick, 1997; Coﬀ, 1999; Simon and Houghton, 2003). However, scholars know little about how underestimations relate to performance. Underestimations are pessimistic estimates of an actual event, like, for instance, a negative forecast on success odds or a below-average estimated development of a favorable environmental trend. Therefore, this chapter aims at reﬁning our understanding of the impact of underestimations as another manifestation of a lack of organizational foresight. Just as overestimations are associated with overconﬁdence, underestimations can be associated with underconﬁdence. Underconﬁdence results from an excessive value attribution to negative diagnostic cues. A simple assumption is that the higher the level...
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