Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance

43 Pages Posted: 7 Jul 2013 Last revised: 14 Jul 2013

See all articles by Rasmus Toft-Kehler

Rasmus Toft-Kehler

Copenhagen Business School; Symbion Entrepreneurial Learning Lab

Karl Wennberg

Linkoping University - Institute for Analytical Sociology (IAS)

Phillip H. Kim

Babson College - Arthur M. Blank Center for Entrepreneurship

Date Written: July 7, 2013

Abstract

This study tackles the puzzle of why increasing entrepreneurial experience does not always lead to improved financial performance of new ventures. We propose an alternate framework demonstrating how experience translates into expertise by arguing that the positive experience-performance relationship only appears to expert entrepreneurs, while novice entrepreneurs may actually perform increasingly worse because of their inability to generalize their experiential knowledge accurately into new ventures. These negative performance implications can be alleviated if the level of contextual similarity between prior and current ventures is high. Using matched employee-employer data of an entire population of Swedish founder-managers between 1990 and 2007, we find a non-linear relationship between entrepreneurial experience and financial performance consistent with our framework. Moreover, the level of industry, geographic, and temporal similarities between prior and current ventures positively moderates this relationship. Our work provides both theoretical and practical implications for entrepreneurial experience — people can learn entrepreneurship and pursue it with greater success as long as they have multiple opportunities to gain experience, overcome barriers to learning, and build an entrepreneurial-experience curve.

Keywords: Serial Entrepreneurship, Learning Curves, Experience, Similarity, Performance

JEL Classification: M13, L26

Suggested Citation

Toft-Kehler, Rasmus Vendler and Wennberg, Karl and Kim, Phillip H., Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance (July 7, 2013). Journal of Business Venturing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2290664

Rasmus Vendler Toft-Kehler

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Symbion Entrepreneurial Learning Lab ( email )

Fruebjergvej 3
Copenhagen, 2100
Denmark

Karl Wennberg (Contact Author)

Linkoping University - Institute for Analytical Sociology (IAS) ( email )

Norrköping, 601 74
Sweden

Phillip H. Kim

Babson College - Arthur M. Blank Center for Entrepreneurship ( email )

231 Forest Street
Babson Park, MA 02457-0310
United States

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