Pitches, Accelerators, and Venture Capital as Determinants of Entrepreneurship and Innovation
Paper Session
Sunday, Jan. 8, 2017 3:15 PM – 5:15 PM
Hyatt Regency Chicago, Grand Suite 3
- Chair: Angelino Viceisza, Spelman College
Learning and Success in Entrepreneurship
Abstract
This paper asks whether the ability to learn is important for success in early stage entrepreneurship. I use application and judging data from nearly 100 new venture competitions to show that negative feedback increases the probability that an entrepreneur abandons his venture. I accomplish this in a difference-in-differences design comparing low ranked losers to high ranked losers across competitions in which entrepreneurs were and were not privately informed of their rank. I then use raw score or rank improvement across rounds as a measure of learning, and show that learning predicts proxies for early stage success. The ranks are a valid quality measure because they predict success independently of winning. These findings are consistent with a view of entrepreneurship as experimentation. Ventures likely to have a lower cost of experimentation, such as software and student-run ventures, learn more. However, founders with degrees from highly ranked schools are less responsive to feedback than their counterparts. This behavior appears rational for elite college graduates, but seems to reflect overconfidence among elite MBA graduates.How Does Feedback Sentiment Affect Entrepreneurial Performance?
Abstract
Does feedback affect start-up firm performance? Feedback can be beneficial and particularly actionable for early-stage firms—it may motivate firms to experiment and improve on their ideas, or help firms speed up the failure process for lower quality ideas. In this paper, we use a proprietary database of business plan competition participants and judges combined with text analysis of feedback to investigate whether firms incorporate feedback and change over time. Specifically, we leverage the feedback sentiment of randomly assigned judges as an instrumental variable to estimate causal effects of feedback on short-term and long-term performance. We find that firms improve within-competition performance after receiving more negative feedback that is mapped to specific areas of improvement and received in the initial round. Interestingly, there are heterogeneous treatment effects based on firm quality for post-competition performance. Specifically, after receiving negative feedback, higher quality firms are more likely to remain operational, while lower quality firms are more likely to shut down.Accelerators and the Regional Supply of Venture Capital Investment
Abstract
Recent years have seen the rapid emergence of a new type of program aimed at seeding startup companies. These programs, often referred to as accelerators, differ from previously known seed-stage institutions such as incubators and angel groups. While proliferation of such accelerators is evident, evidence on efficacy and role of these programs is scant. Nonetheless, local governments and founders of such programs often cite the motivation for their establishment and funding as the desire to transform their local economies through the establishment of a startup technology cluster in their region. In this paper, we attempt to assess the impact that such programs can have on the entrepreneurial ecosystem of the regions in which they are established, by exploring the effects of accelerators on the availability and provision of seed and early stage venture capital funding in the local region.Discussant(s)
Yael Hochberg
, Rice University, Massachusetts Institute of Technology, and NBER
Manual Adelino
, Duke University
David Robinson
, Duke University and NBER
Juan Carlos Suarez Serrato
, Duke University and NBER
JEL Classifications
- L2 - Firm Objectives, Organization, and Behavior
- O3 - Innovation; Research and Development; Technological Change; Intellectual Property Rights