Practice Makes Perfect

Entrepreneurial-Experience Curves and Venture Performance

Rasmus Toft-Kehler, Karl Wennberg, Phillip H. Kim

    Research output: Working paperResearch

    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.
    Original languageEnglish
    Place of PublicationStockholm
    PublisherRatio: Näringslivets forskningsinstitut
    Number of pages43
    Publication statusPublished - 2013
    SeriesRatio Working Paper
    Number210

    Cite this

    Toft-Kehler, R., Wennberg, K., & Kim, P. H. (2013). Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance . Stockholm: Ratio: Näringslivets forskningsinstitut. Ratio Working Paper, No. 210
    Toft-Kehler, Rasmus ; Wennberg, Karl ; Kim, Phillip H. . / Practice Makes Perfect : Entrepreneurial-Experience Curves and Venture Performance . Stockholm : Ratio: Näringslivets forskningsinstitut, 2013. (Ratio Working Paper; No. 210).
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    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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    Toft-Kehler, R, Wennberg, K & Kim, PH 2013 'Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance ' Ratio: Näringslivets forskningsinstitut, Stockholm.

    Practice Makes Perfect : Entrepreneurial-Experience Curves and Venture Performance . / Toft-Kehler, Rasmus; Wennberg, Karl ; Kim, Phillip H. .

    Stockholm : Ratio: Näringslivets forskningsinstitut, 2013.

    Research output: Working paperResearch

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    Toft-Kehler R, Wennberg K, Kim PH. Practice Makes Perfect: Entrepreneurial-Experience Curves and Venture Performance . Stockholm: Ratio: Näringslivets forskningsinstitut. 2013.