Entrepreneurship as Experimentation

31 Pages Posted: 4 Aug 2014 Last revised: 17 Aug 2024

See all articles by William Kerr

William Kerr

Harvard University - Entrepreneurial Management Unit

Ramana Nanda

Imperial College Business School; Harvard University - Entrepreneurial Management Unit

Matthew Rhodes-Kropf

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

Multiple version iconThere are 2 versions of this paper

Date Written: July 2014

Abstract

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.

Suggested Citation

Kerr, William R. and Nanda, Ramana and Rhodes-Kropf, Matthew, Entrepreneurship as Experimentation (July 2014). NBER Working Paper No. w20358, Available at SSRN: https://ssrn.com/abstract=2475705

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ramana Nanda

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

Matthew Rhodes-Kropf

Harvard Business School - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Rock Center 312
Boston, MA 02163
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
78
Abstract Views
1,148
Rank
52,499
PlumX Metrics