Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that...

Past work has shown that failure tolerance by principals has the potential to stimulate innovation, but has not examined how this affects which projects principals will start. We demonstrate that failure tolerance has an equilibrium price ― in terms of an investor's required share of equity...