Entrepreneurs' Cognitive Ability and New Ventures' Performance

Why do some newly founded ventures succeed, while others fail? To address this fundamental question in entrepreneurship discipline, we investigate the role of founder’s cognitive ability and its influence on forming founding team. Using a near-exhaustive sample of Swedish male founders, we find that one standard deviation increase in founders’ cognitive ability is associated with about 23 increase in performance measured by venture sales. This effect is larger for founders operating in high-technology industries. The relationship between founders’ cognitive ability and venture sales is mediated by founding-team size and team collective cognitive abilities. Our study highlights the relevance of resource-based view for entrepreneurship research by demonstrating the dependence of new ventures’ performance on founders’ cognitive ability, especially through attracting other foundingteam members with high cognitive ability.