Document Type : Research Paper
Authors
1
Business Management. Faculty of Management and Accounting, Shahid Beheshti University. Tehran. Iran
2
Department of Business Management, Faculty of Management and Accounting, Shahid Beheshti University of Tehran, Iran.
3
Economics, Faculty of Economic and Political Sciences, Shahid Beheshti University, Tehran, Iran.
10.22059/jibm.2024.366526.4678
Abstract
Objective
Some strategic decisions made by firms and individual decision-makers can be described as excess market entry. Excess entry occurs when too many businesses enter a given market, and subsequently, many fail. Behavioral strategy from the perspective of cognitive biased can help to explain this phenomenon. In this regard, it has been argued that entrants' optimism may contribute to excess entry. Accordingly, the purpose of this research is to investigate the role of managers' optimism in excess market entry.
Methodology
To investigate the role of optimism in market excess entry, the simulation model of market entry decisions has been used. The simulation model of market entry decisions is based on the assumption that entrants are boundedly rational decision-makers whose assessment of market opportunities does not fully match the actual realization of those opportunities, and amount of errors in the assessment of these entrants (including optimism) lead to various market entry outcomes. In this model, by manipulating the assessment error, the different outcomes of market entry (including no entry, missed opportunity, successful entry, and excess entry) have been investigated. The simulation model of market entry decisions is implemented using the Anaconda platform and written with Python 3.
Findings
The findings of this research show that different degrees of optimism of the entrants lead to various outcomes of entering the market for them. The findings show that low levels of optimism are essential for market entry and can lead to successful market entries; however, increased optimism has led to unrealistic assessments of market opportunities and created the ground for excess market entry. Also, the optimism of the entrants under different market conditions has led to various percentages of excess entry. As the findings show, optimism under difficult market entry conditions led to more excess entry than under easy entry conditions.
Conclusions
This research has contributed to the market entry literature in two ways. First, in the previous literature, there is a contradiction between whether the optimism of the entrants is desirable or not. The findings of this research show that little optimism in different market conditions has led to more successful entries. Second, decision-makers optimism in difficult-to-enter markets has led to excess additional entry. When entrants are worried about the difficulty of entering the market, optimism can help them reduce this worry. Hence, as the difficulty of entering the market increases, their optimism will subsequently increase, and they will enter more markets. From a practical implication, market entrants and business managers should have a realistic assessment of market opportunities, and they can also use structured tools such as inside view to reduce optimism bias. Also, the limitations of this research related to the market entry simulation model. Finally, suggestions for future research in this field have been considered.
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