Financing Entrepreneurial Experimentation

29 Pages Posted: 22 Jun 2015 Last revised: 12 Aug 2015

See all articles by Ramana Nanda

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Matthew Rhodes-Kropf

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

Date Written: June 2015

Abstract

The fundamental uncertainty of new technologies at their earliest stages implies that it is virtually impossible to know the true potential of a venture without learning about its viability through a sequence of investments over time. We show how this process of experimentation can be particularly valuable in the context of entrepreneurship because most new ventures fail completely, and only a few become extremely successful. We also shed light on important costs to this process of experimentation, and demonstrate how these can fundamentally alter both the rate and direction of startup innovation across industries, regions and periods of time.

Suggested Citation

Nanda, Ramana and Rhodes-Kropf, Matthew, Financing Entrepreneurial Experimentation (June 2015). NBER Working Paper No. w21278. Available at SSRN: https://ssrn.com/abstract=2621333

Ramana Nanda (Contact Author)

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

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