The illusion of competence: Managers and the Dunning–Kruger effect

Abstract Do managers properly recognize their own expertise? This study explores distortions in self‐perception by investigating the presence of the Dunning–Kruger effect, a cognitive bias that distorts self‐assessment, within managerial contexts. Although widely studied in psychology, its implications for management remain underexplored. Drawing on data from two studies, we examine how this bias manifests among managers in both general management and the specialized domain of digital transformation. Our findings indicate that managers are susceptible to both overconfidence and under‐confidence. The assumption that managers exemplify organizational excellence does not prevent them from being influenced by these biases. Unlike previous research, which has largely focused on overconfidence, our study addresses both overestimation and underestimation, uncovering the complicated dynamics that make self‐assessment so difficult. Additionally, we identify differences in bias prevalence between the two managerial domains, general and more knowledge specific. This study contributes to the growing body of literature on cognitive biases and their relevance in the management field.