Measuring Founding Strategy

34 Pages Posted: 13 Dec 2019

See all articles by Jorge Guzman

Jorge Guzman

Columbia University - Columbia Business School

Aishen Li

Columbia University

Date Written: November 19, 2019

Abstract

We propose an approach to measure strategy using text-based machine learning. The key insight is that distance in the statements made by companies can be partially indicative of their strategic positioning with respect to each other. We formalize this insight by proposing a new measure of strategic positioning — the strategy score — and defining the assumptions and conditions under which we can estimate it empirically. We then implement this approach to score the strategic positioning of a large sample of startups in Crunchbase in relation to contemporaneous public companies. Startups with a higher founding strategy score have higher equity outcomes, reside in locations with more venture capital, and receive a higher amount of financing in seed financing events. One implication of this result is that founding strategic positioning is important for startup performance.

Keywords: Entrepreneurship, Strategy, Strategic Positioning, Machine Learning, Text Analysis

Suggested Citation

Guzman, Jorge and Li, Aishen, Measuring Founding Strategy (November 19, 2019). Available at SSRN: https://ssrn.com/abstract=3489585 or http://dx.doi.org/10.2139/ssrn.3489585

Jorge Guzman (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Aishen Li

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

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