Are You Experienced or Are You Talented?: When Does Innate Talent versus Experience Explain Entrepreneurial Performance?

We explore whether entrepreneurial performance is due to innate talent or the accumulation of entrepreneurial experience. Using a novel data set with multiple observations of founding attempts per individual, we generate a unique measure of entrepreneurial talent. In contrast to prior findings, the relative importance of experience versus talent changes with the context. When the current market or technology is familiar, experience dominates. However, when the venture context is unfamiliar, talent is more important. Individuals with experience and talent handle both familiar and unfamiliar aspects and may extract more from a given level of experience. The findings advance our understanding of how the drivers of venture performance shift with the broader technological and industry environment and places limits on when experience aids performance.MIT Entrepreneurship CenterStanford University. Stanford Technology Ventures ProgramEwing Marion Kauffman Foundatio

Bringing Entrepreneurial Ideas to Life

Organizational design in the context of new venture development is particularly challenging due to initially severe resource constraints. Deepening our understanding of differential productivity in the startup resource assembly process is therefore important. We address the twin questions of what assets are important to venture performance, and under what conditions are those assets especially important? We do so by considering initial venture idea assets and founder contracting experience. The resource-based view of the firm stresses developing the right assets, which accords with idea assets. Firm boundary theories of the firm emphasize structuring relationships in the right way given a set of organizational assets, which accords with founder contracting experience. Using unique survey data, we find that neither view by itself is as important as both theories taken together. We therefore advance an integrated perspective by showing that new ventures perform better when they both identify valuable resources and also assemble human assets with expertise in structuring organizational arrangements to commercialize those ideas. An important implication is that organizational resources have a range of potential values, and that realizing the upper range of value capture involves the additional ability to structure organizational relationships.We gratefully acknowledge funding from the Ewing Marion Kauffman Foundation, the M.I.T. Entrepreneurship Center, and the Alfred P. Sloan Foundation under the Industry Studies Program

The Contingent Effects of Top Management Teams on Venture Performance: Aligning Founding Team Composition With Innovation Strategy and Commercialization Environment

How does the relationship between founding team composition and venture performance depend on the venture\u27s strategy and business environment? Using data from a novel survey of 2,067 firms, we show that while diverse founding teams tend to exhibit higher performance, this is not universally true. We find that founding teams that are diverse are likely to achieve high performance in a competitive commercialization environment. On the other hand, technically focused founding teams are aligned with a cooperative commercialization environment and when the enterprise pursues an innovation strategy. These results are robust to corrections for endogenous team formation concerns. The findings suggest that ventures cannot ignore founding team composition and expect to later professionalize their top management teams to align with their strategy and environment

Cutting your teeth: the beginning of the learning curve

We explore learning-by-doing in an important setting not previously explored - the context of one or more complex experiences encountered in novel circumstances. We explore characteristics that lead to learning at the beginning of the learning curve. We use data from survey responses of 2,111 entrepreneurs to examine performance of startup firms as a measure of outcomes produced by learning-by-doing from prior founding experience. Results indicate substantial productivity benefits accruing from prior entrepreneurial experience. We are the first to exploit panel data on the entire individual history of firm founding to control for individual fixed effects. Areas where entrepreneurs show possible learning effects include the inclination and/or ability to more quickly go through the process of recognizing an opportunity, developing it, and executing the exit strategy.MIT Entrepreneurship Cente