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Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs

Paul A. Gompers
Harvard Business School; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Anna Kovner
Federal Reserve Banks - Federal Reserve Bank of New York; New York University - Robert F. Wagner Graduate School of Public Service

Josh Lerner
Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

David S. Scharfstein
Harvard Business School; National Bureau of Economic Research (NBER)


July 2006


Abstract:     
This paper argues that a large component of success in entrepreneurship and venture capital can be attributed to skill. We show that entrepreneurs with a track record of success are more likely to succeed than first time entrepreneurs and those who have previously failed. Funding by more experienced venture capital firms enhances the chance of success, but only for entrepreneurs without a successful track record. Similarly, more experienced venture capitalists are able to identify and invest in first time entrepreneurs who are more likely to become serial entrepreneurs. Investments by venture capitalists in successful serial entrepreneurs generate higher returns for their venture capital investors. This finding provides further support for the role of skill in both entrepreneurship and venture capital.

Keywords: new ventures, entrepreneurs

JEL Classifications: G24, L16

Working Paper Series

Date posted: October 02, 2006 ; Last revised: November 18, 2009

Suggested Citation

Gompers, Paul A., Kovner, Anna, Lerner, Josh and Scharfstein, David S., Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs (July 2006). Available at SSRN: http://ssrn.com/abstract=933932


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Contact Information

Josh Lerner (Contact Author)
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)
HOME PAGE: http://www.people.hbs.edu/jlerner/
Harvard University - Entrepreneurial Management Unit ( email )
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Paul A. Gompers
Harvard Business School ( email )
Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)
Harvard University - Entrepreneurial Management Unit ( email )
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels Belgium
HOME PAGE: http://www.ecgi.org
Anna Kovner
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
New York University - Robert F. Wagner Graduate School of Public Service
The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

David S. Scharfstein
Harvard Business School ( email )
Boston, MA 02163
United States
617-496-5067 (Phone)
617-496-8443 (Fax)
HOME PAGE: http://www.people.hbs.edu/dscharfstein/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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