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<p>Entrepreneurial firms often operate in uncertain environments where decision-making is influenced by cognitive biases. Grounded in Behavioral Decision Theory (BDT), this study explores how three specific biases—optimism, overconfidence, and the illusion of control—affect firm performance while also examining whether entrepreneurial experience moderates these relationships. Data were gathered through face-to-face interviews with 354 entrepreneurs in Bangladesh using structured questionnaires. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed for the main analysis, and interaction term was used to assess the moderation effect. The findings reveal that optimism and illusion of control negatively impact firm performance, whereas the influence of overconfidence was statistically insignificant. Entrepreneurial experience exhibits no moderating impact on the relationship between cognitive biases and firm performance. Despite growing recognition of cognitive biases as key factors influencing entrepreneurial outcomes, limited research has examined their effects on firm performance with moderation effect of entrepreneurial experience, particularly within emerging economies. This study responds to that gap, offering new insights into how cognitive tendencies shape entrepreneurial firm outcomes in the volatile context of an emerging market.</p>

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Nexus between cognitive biases and firm performance: The moderating role of entrepreneurial experience in Bangladesh

  • 期刊论文

  • 发表日期：

    2025年11月1日

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  • Tania Afroze,
  • Md.Abdur Rashid Sarker

摘要

Entrepreneurial firms often operate in uncertain environments where decision-making is influenced by cognitive biases. Grounded in Behavioral Decision Theory (BDT), this study explores how three specific biases—optimism, overconfidence, and the illusion of control—affect firm performance while also examining whether entrepreneurial experience moderates these relationships. Data were gathered through face-to-face interviews with 354 entrepreneurs in Bangladesh using structured questionnaires. Partial Least Squares Structural Equation Modeling (PLS-SEM) was employed for the main analysis, and interaction term was used to assess the moderation effect. The findings reveal that optimism and illusion of control negatively impact firm performance, whereas the influence of overconfidence was statistically insignificant. Entrepreneurial experience exhibits no moderating impact on the relationship between cognitive biases and firm performance. Despite growing recognition of cognitive biases as key factors influencing entrepreneurial outcomes, limited research has examined their effects on firm performance with moderation effect of entrepreneurial experience, particularly within emerging economies. This study responds to that gap, offering new insights into how cognitive tendencies shape entrepreneurial firm outcomes in the volatile context of an emerging market.