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Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance

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Author Info

  • Toft-Kehler, Rasmus

    ()
    (Copenhagen Business School, Symbion Entrepreneurial Learning Lab)

  • Wennberg, Karl

    ()
    (Ratio and Stockholm School of Economics)

  • Kim, Phillip

    ()
    (Wisconsin School of Business)

Abstract

This study tackles the puzzle of why increasing entrepreneurial experience does not always lead to improved financial performance of new ventures. We propose an alternate framework demonstrating how experience translates into expertise by arguing that the positive experience-performance relationship only appears to expert entrepreneurs, while novice entrepreneurs may actually perform increasingly worse because of their inability to generalize their experiential knowledge accurately into new ventures. These negative performance implications can be alleviated if the level of contextual similarity between prior and current ventures is high. Using matched employee-employer data of an entire population of Swedish founder-managers between 1990 and 2007, we find a non-linear relationship between entrepreneurial experience and financial performance consistent with our framework. Moreover, the level of industry, geographic, and temporal similarities between prior and current ventures positively moderates this relationship. Our work provides both theoretical and practical implications for entrepreneurial experience—people can learn entrepreneurship and pursue it with greater success as long as they have multiple opportunities to gain experience, overcome barriers to learning, and build an entrepreneurial-experience curve.

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File URL: http://ratio.se/sv/publikationer/working-papers/2013/no-210-practice-makes-perfect-entrepreneurial-experience-curves-and-venture-performance.aspx
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Bibliographic Info

Paper provided by The Ratio Institute in its series Ratio Working Papers with number 210.

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Length: 43 pages
Date of creation: 17 Jul 2013
Date of revision:
Handle: RePEc:hhs:ratioi:0210

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Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
Fax: 08-441 59 29
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Web page: http://www.ratio.se/
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Related research

Keywords: Serial Entrepreneurship; Learning Curves; Experience; Similarity; Performance;

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Cited by:
  1. Hessels, Jolanda & Brixy, Udo & Naudé, Wim & Gries, Thomas, 2014. "Skill Variety, Innovation and New Business Formation," IZA Discussion Papers 7889, Institute for the Study of Labor (IZA).
  2. Gottschalk, Sandra & Greene, Francis J. & Höwer, Daniel & Müller, Bettina, 2014. "If you don't succeed, should you try again? The role of entrepreneurial experience in venture survival," ZEW Discussion Papers 14-009, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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