Entrepreneurship as Experimentation

By William R. Kerr, Ramana Nanda, Matthew Rhodes-Kropf. 2014

610 citations recorded by the source corpus.

Entrepreneurship research is on the rise but many questions about its fundamental nature still exist. We argue that entrepreneurship is about experimentation: the probabilities of success are low, extremely skewed and unknowable until an investment is made. At a macro level experimentation by new firms underlies the Schumpeterian notion of creative destruction. However, at a micro level investment and continuation decisions are not always made in a competitive Darwinian contest. Instead, a few investors make decisions that are impacted by incentive, agency and coordination problems, often before a new idea even has a chance to compete in a market. We contend that costs and constraints on the ability to experiment alter the type of organizational form surrounding innovation and influence when innovation is more likely to occur. These factors not only govern how much experimentation is undertaken in the economy, but also the trajectory of experimentation, with potentially very deep economic consequences.

Subfields: Accounting, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/856b61cd21a2e79dcc263aad01205f75da17765c

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Citations in the corpus

Age and High-Growth Entrepreneurship (2020, background): “Meanwhile, the return on the vast majority of private venture-capital investments is small or negative (e.g., Kerr et al. 2014).”
Entry, exit, and the potential for resource redeployment (2017, background): “This is analogous to the investment behavior of venture capitalists, who recognize that the vast majority of the businesses they support will fail to earn a positive return (e.g., Kerr, Nanda, and Rhodes-Kropf, 2014).”
Parallel Play: Startups, Nascent Markets, and Effective Business-model Design (2019, background): “…and iteration, topics also addressed in longstanding streams of work on experimentation (e.g., Thomke, 1998; Miner, Bassoff, and Moorman, 2001; Kerr, Nanda, and Rhodes-Kropf, 2014), continuous change (e.g., Brown and Eisenhardt, 1997; Rindova and Kotha, 2001), and product development (Pisano,…”
Can You Gig It? An Empirical Examination of the Gig Economy and Entrepreneurial Activity (2018, neutral): “In principle, gig-economy employment may enable experimental sampling of potential opportunities because sufficient resources are available to afford it (Greve 2007, Kerr et al. 2014, Shah and Tripsas 2007).”
Entrepreneurial finance and technology transfer (2014, background): “This recognition leads to a plethora of studies on entrepreneurial finance issues, such as Initial Public Offerings and Venture Capitalists, that are grounded both in financial economics and in entrepreneurship (Kerr et al. 2014; Levis and Vismara 2013; Vismara et al. 2012).”
The Effects of Business Accelerators on Venture Performance: Evidence from Start-Up Chile (2017, background): “First, similar to prior research (Kerr et al. 2014; Goldfarb et al. 2007; Hallen et al. 2016), we hand-collected Web-based performance measures for all applicants.”