Skilled or Just Overconfident? Field Experimental Evidence on the Effect of Overconfidence on Promotion Probability

*Eva-Maria Aulich
Institute for Strategy and Business Economics, University of

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     Last modified: March 10, 2011
     Presentation date: 03/12/2011 9:00 AM in NH 1130, Session B
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Abstract
This project aims to find out whether the most skilled candidates receive promotion proposals in promotion tournaments or in fact the most overconfident ones. Up to now this question has only been answered theoretically: Several models predict that overconfidence improves the chances of getting promoted. To test this prediction I conducted a field experiment with a group of 436 male recruits of the Swiss Armed Forces, some of whom in fact received promotion proposals. Data was collected at two points in time during their military training. First, the participants were tested for overconfidence, when none of them yet knew whether he would receive a promotion proposal. At the second time point of testing, the list of officer candidates had been posted. The effect of overconfidence on the probability of receiving a promotion proposal was estimated by a probit model. The results show that overconfidence has a strong positive and statistically highly significant effect on receiving a promotion proposal. Moreover, the effect of overconfidence is much stronger than the effect of the candidates’ actual job-specific knowledge. These results have important implications for promotion tournaments and their impacts on candidates.