Does overconfidence of CEOs increase startup performance? The role of marketing capability

Purpose This study aims to theorize and investigate the role of marketing capability and strategic alliances on the relationship between startup chief executive officers’ (CEO) overconfidence and firm performance. Design/methodology/approach This study empirically analyzes archival data for US e-commerce startups from 2014 to 2021 to quantify the effects of overconfidence on firm performance that enables to conduct counterfactual analysis and address endogeneity issue. Findings Overconfidence can drive individuals toward entrepreneurial orientation, prompting them to start their own firms. However, it paradoxically remains a leading cause of firm failure. This research highlights that marketing capability can transform the negative impact of CEO overconfidence on firm performance into a positive one, whereas strategic alliances do not offer the same benefit. Research limitations/implications This study explores factors helping startups to reverse the detrimental effects of overconfidence. However, this study uses venture capitalist valuation rather than product market performance metrics (e.g., sales) to measure startup performance, suggesting a potential avenue for future research. Practical implications For startup stakeholders, including potential employees, investors and startup professionals, this research suggests that CEO overconfidence can be advantageous if managed with a focus on enhancing marketing capabilities, while exercising caution with strategic alliances. Originality/value This paper offers a novel perspective on how CEOs’ personal traits, specifically overconfidence, influence startup performance and how this negative impact can be mitigated through marketing capabilities. Unlike most prior studies, this paper tests its hypotheses using archival data from databases, media coverage and social media profiles.