You would assume that gaining experience in a domain builds confidence. However, our open access publication at the Journal of Business Research shows that it does not work like this in the context of entrepreneurship. Instead, some of the 281 entrepreneurs we studied show the Dunning-Kruger effect; that is, inexperience makes people overconfident, experience gives the awareness to correct this, and thus experience initially reduces confidence.
Helping small businesses and going beyond the simple approach
We are part of a consulting project for small businesses by the Flemish government. Small businesses who need help (e.g., with surviving, with growing, succession, and other aspects of strategic change) can sign up for a relatively small fee. The entrepreneurs that lead such a business fill in our survey, which serves as input for their coaches, as well as serving as data for us as researchers.
The resulting dataset contains people with a variety of years working as an entrepreneur, as well as a variety of confidence in their ability to do entrepreneurial tasks successfully. We go two steps beyond simply correlating those data. First, we argue that experience is more than ‘the number of years ; some entrepreneurs encounter more challenges in one year than others in their lifetime. To capture such differences, we distinguish small businesses with an ambitious strategy (i.e., often add or replace offerings) and those with a safe strategy (i.e., keep or only slightly change the same offerings). Second, we test for the possibility that the relation between experience and confidence may not be linear.
The story we see in the data
Entrepreneurs who start a venture with high confidence tend to have an ambitious strategy. Such a strategy exposes them to challenging encounters which make them lose confidence over experience for the first fifteen years. By contrast, those who start a venture with neutral confidence choose a safe strategy. They have familiar encounters which causes their confidence to be stable over experience.
At fifteen years of tenure, we see the two groups converge at neutral confidence. Thereafter, the groups diverge again. Only now, confidence starts to build for those with an ambitious strategy as their challenging encounters lead to strong learning, and they don’t have many shortcomings left to become aware of. Meanwhile, those with a safe strategy remain at the same neutral confidence.
An invitation for compassion and lifelong learning
For entrepreneurs, this means compassion when others or they themselves lose confidence when engaging in ambitious strategies. For a longer time span than one might intuit, it can still turn around! Second, to increase confidence, choosing an ambitious strategy can help, but expect to endure experiences that seem too challenging for quite some years.
The increase in confidence from experience after fifteen years affirms the importance of a mindset of lifelong learning.
For educators, this means that exposing students to entrepreneurial experiences may not help them build confidence in entrepreneurial ability. Especially challenging experiences might even harm their confidence before it starts to build their confidence (even among those who proactively choose it). Furthermore, losing confidence after such experience does not mean that entrepreneurship is not fitting for the student, because that happens even among real entrepreneurs. Finally, the increase in confidence from experience after fifteen years affirms the importance of a mindset of lifelong learning.