Learning from Feedback: Evidence from New Ventures. (15th February 2021)

• Record Type: Journal Article
• Authors: Howell, Sabrina T
• Is Part Of: Review of finance. Volume 25:Number 3(2021)
• Page Start: 595
• Page End: 627
• Publication Date: 2021-02-15
• Subjects: L26 -- G24 -- D83; Entrepreneurship -- Learning -- Feedback -- Overconfidence -- New venture competitions; Finance -- Europe -- Periodicals; Financiën; Finance; Periodicals; 332.09405
• DOI: 10.1093/rof/rfab006
• Languages: English
• ISSNs: 1572-3097

Abstract

Abstract: This article studies how early-stage entrepreneurs respond to negative feedback about the quality of their ventures. We use data from new venture competitions, some of which privately inform founders of their relative rank. The empirical strategy compares lower and higher ranked losers across competitions in which they did and did not observe their standing. Receiving negative feedback increases average venture abandonment by 13%. Differences in responsiveness—for example, in venture risk, venture maturity, and signal precision—are consistent with particular theories about entrepreneurship, including the importance of experimentation.