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Entrepreneurial Uncertainty and Expert Evaluation: An Empirical Analysis

Author

Listed:
  • Erin L. Scott

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

  • Pian Shu

    (Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia 30308)

  • Roman M. Lubynsky

    (Venture Mentoring Service, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

Abstract

This paper empirically examines the evaluations of 537 ventures in high-growth industries performed by 251 experienced entrepreneurs, investors, and executives. These experts evaluated ventures by reading succinct summaries of the ventures without meeting the founding teams, and their evaluations were not disclosed to the entrepreneurs. We find that experts can differentiate among early-stage ventures on grounds of quality beyond the explicit venture and entrepreneur characteristics contained in the written summaries. They can only do so effectively, however, for ventures in the hardware, energy, life sciences, and medical devices sectors; they cannot do so for ventures in the consumer products, consumer web and mobile, and enterprise software sectors. Our results highlight sector-specific heterogeneity in the information needed to effectively screen ventures, a finding that has implications for the design of optimal investment strategies.

Suggested Citation

  • Erin L. Scott & Pian Shu & Roman M. Lubynsky, 2020. "Entrepreneurial Uncertainty and Expert Evaluation: An Empirical Analysis," Management Science, INFORMS, vol. 66(3), pages 1278-1299, March.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:3:p:1278-1299
    DOI: 10.1287/mnsc.2018.3244
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    References listed on IDEAS

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    2. Quignon, Aurelien, 2023. "Crowd-based feedback and early-stage entrepreneurial performance: Evidence from a digital platform," Research Policy, Elsevier, vol. 52(7).
    3. Wright, Nataliya Langburd & Nagle, Frank & Greenstein, Shane, 2023. "Open source software and global entrepreneurship," Research Policy, Elsevier, vol. 52(9).
    4. Hong Luo & Jeffrey Macher & Michael Wahlen, 2021. "Judgment Aggregation in Creative Production: Evidence from the Movie Industry," Management Science, INFORMS, vol. 67(10), pages 6358-6377, October.
    5. Jacqueline N. Lane & Misha Teplitskiy & Gary Gray & Hardeep Ranu & Michael Menietti & Eva C. Guinan & Karim R. Lakhani, 2022. "Conservatism Gets Funded? A Field Experiment on the Role of Negative Information in Novel Project Evaluation," Management Science, INFORMS, vol. 68(6), pages 4478-4495, June.

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