Learning from Feedback: Evidence from New Ventures

88 Pages Posted: 5 Oct 2017 Last revised: 5 Dec 2019

See all articles by Sabrina Howell

Sabrina Howell

New York University (NYU) - Leonard N. Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 3, 2019

Abstract

This paper studies how early stage entrepreneurs respond to negative feedback about the quality of their ventures, with a focus on heterogeneity in responsiveness. The data consist of application and judging information linked to outcomes for 4,328 new ventures in 87 competitions. In 34 of the competitions, founders are privately informed of their relative rank. The empirical strategy compares lower and higher ranked losers across competitions in which they did and did not observe their standing. Receiving negative feedback increases average venture abandonment by 13 percent. Among other results, I show that responsiveness is higher when the signal is more precise, the venture is riskier or less mature, and the founder is a woman. The effect appears to reflect feedback regarding the “business” aspects of a startup, rather than the quality of its technology.

Keywords: Entrepreneurship, Learning

JEL Classification: G24, G4, L1, L2, L26, O3

Suggested Citation

Howell, Sabrina, Learning from Feedback: Evidence from New Ventures (December 3, 2019). Available at SSRN: https://ssrn.com/abstract=3047811 or http://dx.doi.org/10.2139/ssrn.3047811

Sabrina Howell (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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