Managerial Hubris, Trade Associations and Regulatory Knowledge in Micro‐Firms

To avoid breaking the law for regulatory non‐compliance, it is essential that micro‐firm owner‐managers are aware of deficiencies in their knowledge, so that they can seek improvement and avoid over‐confidence (i.e. hubris) in their knowledge levels. Using newly collected survey data from micro‐firms in the English accommodation sector and multivariate techniques, the authors explore the possibility of hubris by making a novel distinction between the Perceived‐Knowledge and Actual‐Knowledge of regulation held by micro‐firm owner‐managers. Both Perceived‐Knowledge (from self‐assessment) and Actual‐Knowledge (from a simple test) over four core areas of regulation are found to be different, generally poor and suggestive of hubris. The relationship between these knowledge levels is further explored by considering the role of trade association membership (since they support members) and attitude (since it effects learning). Attitude is found to be positively associated with both forms of knowledge, while trade association memberships are also found to be associated with enhanced Perceived‐Knowledge, but not Actual‐Knowledge. In light of the results, the authors suggest several priority areas for improving Actual‐Knowledge and self‐assessment skills, and areas for future research.