The Ideator’s Bias: How Identity-Induced Self-Efficacy Drives Overestimation in Employee-Driven Process Innovation

Abstract

Grasping the true value of ideas is essential for corporate innovation success. When it comes to forecasting the value of one's own innovation ideas, however, people may err systematically. In this paper, we shed light on this ideator's bias, and examine when and why certain ideas are more prone to biased evaluations. Specifically, we argue that biased idea evaluations depend on the self-efficacy that ideators may derive from their specific role and social identity in the firm when generating a specific idea. We test our theoretical predictions of such a situation-specific perspective on overconfidence by using a corporate dataset on process innovations and their valuations. Furthermore, we triangulate our predicted mechanism and rule out alternative explanations through a series of additional interviews and four scenario-based experiments. Consistent with our situation-specific, identity-based account, we find that ideas from employees at a higher (vs. lower) organizational level, and from employees generating ideas in groups (vs. individually) are more prone to an ideator's bias. In doing so, our study helps explain when the ideator's bias prevails in a real-life organizational context, raises caution about some current proxies to identify high-potential ideas, and provides fresh insights to established theories around overconfidence and self-efficacy.For most of us, the tendency toward optimism is unavoidable. And it's unlikely that companies can, or would even want to, remove the organizational pressures that promote optimism. Still, optimism can, and should, be tempered. Simply understanding the sources of overoptimism can help planners challenge assumptions, bring in alternative perspectives, and in general take a balanced view of the future. Lovallo and Kahneman (2003: 61).

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“…40 Previous research analyzing CEO overconfidence has found that characteristics like extroversion, narcissism, or core-self-evaluation explain differences in CEO judgments. For example, Fuchs et al 41 found that being a higher-level employee induced self-efficacy, which in turn affected their idea overvaluation along innovation processes.…”

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“…According to social cognitive theory, self-efficacy refers to the belief in one's ability to execute and organize the action process [29]. Self-efficacy has the attribute of experiential learning, which is easy to be influenced by different leadership styles in the process of subordinates' work [29,30]. Therefore, when green transformational leadership emerges, it may have a "trickle-down effect".…”

“…Green self-efficacy refers to the belief in the ability to implement and organize the process of achieving environmental goals [29,32]. Since efficacy beliefs nourish internal motivation by enhancing the perception of self-ability [29,30], green self-efficacy may also reflect intrinsic motivation in environmental activities [6,32].…”

Sparking Manufacturing Innovation: How Temporary Interplant Assignments Increase Employee Idea Values

“…5 See Marengo et al (2000) for a formal analysis of reframing in organisational problem solving. 6 A subset of 944 process improvement ideas together with additional data were used in Fuchs et al (2019) to investigate how initial idea value estimates (which were available for that subset of 944 ideas) deviate from final (real) idea values. This is not an issue in the present paper, as we only use the final (real) idea values.…”