Ground-breaking research from Cranfield School of Management has revealed that cognitive psychology can help explain financial performance in entrepreneurial businesses. The findings support the established view that risk-takers are likely to achieve the highest sales growth. The real news, however, is that they also demonstrate that owner-managers’ over-confidence in their own ability or judgment correlates with poor profit performance in their businesses. Conversely, owner-managers who display caution in using their judgment outside areas of specialist knowledge show a superior growth in their firms’ profits.
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