Univrsity Of Tehran Press Journal of Business Management 2008-5907 17 3 2025 08 23 The Role of Managerial Optimism in Excess Entry: A Simulation of Market Entry Decisions The Role of Managerial Optimism in Excess Entry: A Simulation of Market Entry Decisions 663 698 97579 10.22059/jibm.2024.366526.4678 FA Omid Soleymanzadeh Ph.D., Department of Business Management, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. 0000-0003-0940-1778 Bahman Hajipour Associate Prof., Department of Business Management, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran. 0000-0001-8972-4002 Yadollah Dadgar Prof., Department of Economic, Faculty of Economic and Political Sciences, Shahid Beheshti University, Tehran, Iran. 0000-0001-5040-9531 Journal Article 2023 10 10 Objective Some strategic decisions made by firms and individual decision-makers can lead to excess market entry, situations in which an excessive number of businesses enter a market, resulting in a high rate of failure. Behavioral strategy, particularly through the lens of cognitive biases, offers a useful framework for understanding this phenomenon. In this context, managerial optimism has been identified as a potential contributing factor to excess entry. Accordingly, this study aims to examine the role of managerial optimism in driving excessive market entry. Methodology To investigate the role of optimism in excess market entry, the simulation model of market entry decisions was used. The model relies on the assumption that entrants were boundedly rational decision-makers whose assessments of market opportunities did not fully align with the actual realization of those opportunities. Errors in these assessments, including optimism, led to various market entry outcomes. In this model, by manipulating the assessment error, different market entry outcomes (including no entry, missed opportunity, successful entry, and excess entry) were examined. The simulation model of market entry decisions was implemented using the Anaconda platform and developed in Python 3. Findings The findings of this research showed that different degrees of optimism among entrants led to various outcomes in their market entry decisions. The results also revealed that low levels of optimism were essential for market entry and often resulted in successful entries. However, increased optimism led to unrealistic assessments of market opportunities and created conditions conducive to excess market entry. Moreover, the optimism of entrants under different market conditions resulted in varying percentages of excess entry. As the findings indicated, optimism under difficult market entry conditions led to higher levels of excess entry compared to easier entry conditions. Conclusion This research contributed to the market entry literature in two ways. First, in the extant literature, there was a contradiction regarding whether the optimism of entrants was desirable or not. The findings of this research showed that a small amount of optimism in different market conditions led to more successful entries. Second, decision-makers’ optimism in difficult-to-enter markets resulted in excessive additional entry. When entrants were concerned about the difficulty of entering the market, optimism helped them reduce this worry. Hence, as the difficulty of entering the market increased, their optimism subsequently increased, and they entered more markets. From a practical perspective, market entrants and business managers needed to have a realistic assessment of market opportunities, and they could also use structured tools such as the inside view to reduce optimism bias. Additionally, the limitations of this research were related to the market entry simulation model. Finally, suggestions for future research in this field were considered. Objective Some strategic decisions made by firms and individual decision-makers can lead to excess market entry, situations in which an excessive number of businesses enter a market, resulting in a high rate of failure. Behavioral strategy, particularly through the lens of cognitive biases, offers a useful framework for understanding this phenomenon. In this context, managerial optimism has been identified as a potential contributing factor to excess entry. Accordingly, this study aims to examine the role of managerial optimism in driving excessive market entry. Methodology To investigate the role of optimism in excess market entry, the simulation model of market entry decisions was used. The model relies on the assumption that entrants were boundedly rational decision-makers whose assessments of market opportunities did not fully align with the actual realization of those opportunities. Errors in these assessments, including optimism, led to various market entry outcomes. In this model, by manipulating the assessment error, different market entry outcomes (including no entry, missed opportunity, successful entry, and excess entry) were examined. The simulation model of market entry decisions was implemented using the Anaconda platform and developed in Python 3. Findings The findings of this research showed that different degrees of optimism among entrants led to various outcomes in their market entry decisions. The results also revealed that low levels of optimism were essential for market entry and often resulted in successful entries. However, increased optimism led to unrealistic assessments of market opportunities and created conditions conducive to excess market entry. Moreover, the optimism of entrants under different market conditions resulted in varying percentages of excess entry. As the findings indicated, optimism under difficult market entry conditions led to higher levels of excess entry compared to easier entry conditions. Conclusion This research contributed to the market entry literature in two ways. First, in the extant literature, there was a contradiction regarding whether the optimism of entrants was desirable or not. The findings of this research showed that a small amount of optimism in different market conditions led to more successful entries. Second, decision-makers’ optimism in difficult-to-enter markets resulted in excessive additional entry. When entrants were concerned about the difficulty of entering the market, optimism helped them reduce this worry. Hence, as the difficulty of entering the market increased, their optimism subsequently increased, and they entered more markets. From a practical perspective, market entrants and business managers needed to have a realistic assessment of market opportunities, and they could also use structured tools such as the inside view to reduce optimism bias. Additionally, the limitations of this research were related to the market entry simulation model. Finally, suggestions for future research in this field were considered.

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