IDEAS home Printed from https://ideas.repec.org/p/atv/wpaper/2109.html

Do not judge a business idea by its cover: The relation between topics in business ideas and incorporation probability

Author

Listed:
  • Jessica Birkholz

Abstract

It is of key importance to identify innovative business ideas in an early stage, so that funding resources can be adequately allocated according to their economic potential. Traditional indicators do not reliably discriminate business ideas with high degree of innovativeness and high incorporation chances from those with low degree of innovativeness and low incorporation prospects. Therefore, this paper examines the content of business idea descriptions to improve the estimations of the incorporation probability. The paper aims to answer two questions: 1) Are there differences in topic prevalence in innovative and non-innovative business ideas?, and 2) How does the composition of topics related to a business idea influence its incorporation probability? Structural topic modeling and classification tree analysis are applied on business idea descriptions from a competition in Bremen, Germany, from 2003 until 2019. The results show that business idea descriptions are a rich source of information to identify both innovative ideas and those with higher incorporation prospects.

Suggested Citation

  • Jessica Birkholz, 2021. "Do not judge a business idea by its cover: The relation between topics in business ideas and incorporation probability," Bremen Papers on Economics & Innovation 2109, University of Bremen, Faculty of Business Studies and Economics.
    • Handle: RePEc:atv:wpaper:2109
    DOI: https://doi.org/10.26092/elib/1283
    as

    Download full text from publisher

    File URL: https://media.suub.uni-bremen.de/bitstream/elib/5573/4/Do%20not%20judge%20a%20business%20idea%20by%20its%20cover_Birkholz%2c%20ierp.pdf
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.26092/elib/1283?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Erik Hurst & Benjamin Wild Pugsley, 2011. "What Do Small Businesses Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 73-142.
    2. David Audretsch & Max Keilbach, 2004. "Entrepreneurship Capital and Economic Performance," Regional Studies, Taylor & Francis Journals, vol. 38(8), pages 949-959.
    3. Dorian Proksch & Wiebke Stranz & Nino Röhr & Cornelia Ernst & Andreas Pinkwart & Michael Schefczyk, 2017. "Value-adding activities of venture capital companies: a content analysis of investor’s original documents in Germany," Venture Capital, Taylor & Francis Journals, vol. 19(3), pages 129-146, July.
    4. Lisa K. Gundry & Laurel F. Ofstein & Javier Monllor, 2016. "Entrepreneurial Team Creativity: Driving Innovation from Ideation to Implementation," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 24(01), pages 55-77, March.
    5. Carter, Nancy M. & Gartner, William B. & Reynolds, Paul D., 1996. "Exploring start-up event sequences," Journal of Business Venturing, Elsevier, vol. 11(3), pages 151-166, May.
    6. Joan-Lluis Capelleras & Francis J. Greene, 2008. "The determinants and growth implications of venture creation speed," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 20(4), pages 317-343, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jessica Birkholz, 2023. "Do not judge a business idea by its cover: The relation between topics in business ideas and incorporation probability," The Journal of Technology Transfer, Springer, vol. 48(4), pages 1327-1358, August.
    2. Mthanti, Thanti & Ojah, Kalu, 2017. "Institutions, Human Capital and Entrepreneurial Orientation (EO): Implications for Growth Strategy," MPRA Paper 89551, University Library of Munich, Germany.
    3. Mthanti, Thanti & Ojah, Kalu, 2017. "Entrepreneurial orientation (EO): Measurement and policy implications of entrepreneurship at the macroeconomic level," Research Policy, Elsevier, vol. 46(4), pages 724-739.
    4. Alicia Robb & Adji Fatou Diagne, 2025. "Startup Dynamics: Transitioning from Nonemployer Firms to Employer Firms, Survival, and Job Creation," Working Papers 25-26, Center for Economic Studies, U.S. Census Bureau.
    5. Rafael La Porta & Andrei Shleifer, 2014. "Informality and Development," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 109-126, Summer.
    6. Duygan-Bump, Burcu & Levkov, Alexey & Montoriol-Garriga, Judit, 2015. "Financing constraints and unemployment: Evidence from the Great Recession," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 89-105.
    7. Vojislav Maksimovic & Gordon Phillips & Liu Yang, 2023. "Do IPO Firms Become Myopic?," Review of Finance, European Finance Association, vol. 27(3), pages 765-807.
    8. Luca David Opromolla & Michele Dell'Era, 2018. "A General Equilibrium Theory of Occupational Choice under Optimistic Beliefs about Entrepreneurial Ability," Working Papers w201822, Banco de Portugal, Economics and Research Department.
    9. Joseph Farhat & Sharon Matusik & Alicia Robb & David T. Robinson, 2018. "New directions in entrepreneurship research with the Kauffman Firm Survey," Small Business Economics, Springer, vol. 50(3), pages 521-532, March.
    10. Poschke, Markus, 2013. "The Decision to Become an Entrepreneur and the Firm Size Distribution: A Unifying Framework for Policy Analysis," IZA Discussion Papers 7757, Institute of Labor Economics (IZA).
    11. Jensen, Thais Laerkholm & Leth-Petersen, Søren & Nanda, Ramana, 2022. "Financing constraints, home equity and selection into entrepreneurship," Journal of Financial Economics, Elsevier, vol. 145(2), pages 318-337.
    12. Kyle Herkenhoff, 2016. "The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship," 2016 Meeting Papers 781, Society for Economic Dynamics.
    13. Ola Bengtsson & John R. M. Hand, 2013. "Employee Compensation in Entrepreneurial Companies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 312-340, June.
    14. Anmol Bhandari & Ellen R. McGrattan, 2017. "Sweat Equity in U.S. Private Business," Staff Report 560, Federal Reserve Bank of Minneapolis.
    15. Michele Dell'Era & Luca David Opromolla & Luís Santos‐Pinto, 2023. "Can optimism solve the entrepreneurial earnings puzzle?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(1), pages 139-169, January.
    16. Magnus Henrekson & Tino Sanandaji, 2020. "Measuring Entrepreneurship: Do Established Metrics Capture Schumpeterian Entrepreneurship?," Entrepreneurship Theory and Practice, , vol. 44(4), pages 733-760, July.
    17. Andrea Colciago & Volker Lindenthal & Antonella Trigari, 2019. "Who Creates and Destroys Jobs over the Business Cycle?," DNB Working Papers 628, Netherlands Central Bank, Research Department.
    18. Changwoo Nam & Jiyoon Oh, . "Changes in Competition of Small vs. Large Firms from International Trade," Chapters, in: Chin Hee Hahn & Dionisius A. Narjoko (ed.), Globalization and Performance of Small and Large Firms, chapter 5, pages V-1 - V-4, Economic Research Institute for ASEAN and East Asia (ERIA).
    19. Åstebro, Thomas & Tåg, Joacim, 2017. "Gross, net, and new job creation by entrepreneurs," Journal of Business Venturing Insights, Elsevier, vol. 8(C), pages 64-70.
    20. Ross Levine & Yona Rubinstein, 2017. "Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(2), pages 963-1018.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:atv:wpaper:2109. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Matheus Eduardo Leusin (email available below). General contact details of provider: https://edirc.repec.org/data/iibrede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.