When does advice impact startup performance?

Chatterji, Aaron; Delecourt, Solène; Hasan, Sharique; Koning, Rembrand

doi:10.1002/smj.2987

Cited by 152 publications

(96 citation statements)

References 89 publications

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“…2 Secondly, while we are not aware of other studies that directly test group-based versus individual consulting, a recent literature has highlighted the ability of firms to improve their business practices when formed into groups or paired with other firms that can serve as role models (e.g. Cai and Szeidl 2018, Chatterji et al 2018, Dalton et al 2018, Lafortune et al 2018. Finally, this paper contributes to a broader literature on how to scale up policies from promising researcher pilot studies (e.g.…”

Section: Introductionmentioning

confidence: 90%

Improving Management with Individual and Group-Based Consulting: Results from a Randomized Experiment in Colombia

Iacovone¹,

Maloney²,

McKenzie³

2019

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Policy Research Working Paper 8854 Differences in management quality are an important contributor to productivity differences across countries. A key question is how to best improve poor management in developing countries. This paper tests two different approaches to improving management in Colombian auto parts firms. The first uses intensive and expensive one-on-one consulting, while the second draws on agricultural extension approaches to provide consulting to small groups of firms at approximately one-third of the cost of the individual approach. Both approaches lead to improvements in management practices of a similar magnitude (8-10 percentage points), so that the new group-based approach dominates on a cost-benefit basis. Moreover, the paper finds some evidence that the group-based intervention led to increases in firm size over the next three years, while the impacts on firm outcomes are smaller and statistically insignificant for the individual consulting. The results point to the potential of group-based approaches as a pathway to scaling up management improvements. This paper is a product of the Development Research Group, Development Economics and the Finance, Competitiveness and Innovation Global Practice. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world.

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Section: Introductionmentioning

confidence: 90%

Improving Management with Individual and Group-Based Consulting: Results from a Randomized Experiment in Colombia

Iacovone¹,

Maloney²,

McKenzie³

2019

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“…Azoulay et al () find evidence that losing a productive peer hurts the performance of scientists, and Oettl () shows that losing a helpful and productive peer is even worse. In a more recent study, Chatterji et al () find that management advice from peers helps the founders of startups grow their companies 2 years after the intervention.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

“…Peers share knowledge, provide help, and set performance expectations (e.g., Herbst & Mas, ; Housman & Minor, ; Mas & Moretti, ). Similarly, much of the value of startup incubators and accelerators is derived from the new social interactions they engineer between nascent entrepreneurs (Chatterji, Delecourt, Hasan, & Koning, ; Hallen, Bingham, & Cohen, ; Hasan & Koning, ). However, when researchers have tried to engineer peer effects in other contexts, they have often failed (Carrell, Sacerdote, & West, ).…”

Section: Introductionmentioning

confidence: 99%

Prior ties and the limits of peer effects on startup team performance

Hasan

Koning

2019

Strategic Management Journal

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Research Summary We conduct a field experiment at an entrepreneurship bootcamp to investigate whether interaction with proximate peers shapes a nascent startup team's performance. We find that teams whose members lack prior ties to others at the bootcamp experience peer effects that influence the quality of their product prototypes. A 1‐SD increase in the performance of proximate teams is related to a two‐thirds SD improvement for a focal team. In contrast, we find that teams whose members have many prior ties interact less frequently with proximate peers, and thus their performance is unaffected by nearby teams. Our findings highlight how prior social connections, which are often a source of knowledge and influence, can limit new interactions and thus the ability of organizations to leverage peer effects to improve the performance of their members. Managerial Summary Researchers and policymakers believe that accelerators, incubators, and bootcamps help entrepreneurial ecosystems spur innovation and drive startup growth. The effectiveness of these organizations, in large part, depends on the new social interactions fostered among colocated entrepreneurs. Yet, little evidence exists about the extent to which such interactions actually lead to spillovers. We ran a controlled experiment at a startup bootcamp to investigate when entrepreneurs were most affected by their colocated peers. Not everyone benefited. We found that entrepreneurs with many prior ties to others at the bootcamp made fewer new connections, especially to neighboring peers, and thus did not experience significant spillovers. In contrast, those without prior connections experienced the greatest spillovers because they interacted frequently with people on nearby colocated teams. Our findings highlight how organizations like incubators and bootcamps, designed to foster new connections, might sometimes just reinforce old networks.

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“…Entrepreneurial performance outcomes. Existing research suggests that entrepreneurs with larger and more diverse sets of business relationships are likely to perform better in terms of their survival, financing, and profitability (Shane and Cable, 2002;Chatterji et al, 2018). This happens because diverse business relationships provide access to information about market opportunities, increase the chance that an entrepreneur will come across a valuable new practice, and provide better access to resources such as funding and investments (Hochberg,Ljungqvist,13 and Lu, 2007).…”

Section: Introductionmentioning

confidence: 99%

“…This information is all the more crucial in developing countries, where formal institutions that encourage information flows are often weak. Therefore, a key challenge for entrepreneurs in developing countries is how to access new, accurate, and timely information.Prior research has highlighted that advice from peers can help entrepreneurs resolve this problem of information access (Zuckerman and Sgourev, 2006;Kacperczyk, 2013;Abraham, 2019).Relationships with peers can serve as important sources of information about how to manage a business, identify market opportunities, and learn new practices (Sorenson, Rivkin, and Fleming, 2006;Stuart and Ding, 2006;Chatterji et al, 2018). However, research also suggests that entrepreneurs' portfolios of peer relationships are frequently far from optimal in terms of providing access to information.…”

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confidence: 99%

The value of communication: Evidence from a field experiment with entrepreneurs in Togo

Dimitriadis¹,

Koning²

2019

Preprint

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Why do some entrepreneurs benefit from their portfolio of peer advisers while others do not? In this study, we argue that communication practices are an important but overlooked factor in the formation of useful advice relationships between entrepreneurs, particularly in the context of developing economies. We hypothesize that improving entrepreneurs’ communication practices will affect the relationships they form and have implications for their business performance. To test our theory, we conducted a field experiment in Togo with 301 entrepreneurs who were randomized into a communication practices intervention that was embedded in a business training program. We found that entrepreneurs who were exposed to better communication practices perceived interactions more cooperatively and exchanged more information during those interactions. Moreover, improving communication practices also led to a 50 percent increase in the number of relationships entrepreneurs formed with peers. These relationships exhibited more matching based on skill and were more ethnically diverse. Finally, communication practices training also substantially increased entrepreneurs’ business performance. Our findings highlight how communication practices play a central role in entrepreneurs’ ability to form portfolios of relationships and perform in challenging business environments.

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When does advice impact startup performance?

Cited by 152 publications

References 89 publications

Improving Management with Individual and Group-Based Consulting: Results from a Randomized Experiment in Colombia

Improving Management with Individual and Group-Based Consulting: Results from a Randomized Experiment in Colombia

Prior ties and the limits of peer effects on startup team performance

The value of communication: Evidence from a field experiment with entrepreneurs in Togo

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