Do Network Dynamics Undermine Idea-based Network Advantages? Experimental Results from an Entrepreneurship Bootcamp

Rembrand  Koning

Working Paper | 2016

Do Network Dynamics Undermine Idea-based Network Advantages? Experimental Results from an Entrepreneurship Bootcamp

Abstract

Do networks plentiful in ideas provide early stage startups with performance advantages? On the one hand, network positions that provide access to a multitude of ideas are thought to increase team performance. On the other hand, research on network formation argues that such positional advantages should be fleeting as entrepreneurs strategically compete over the most valuable network positions. To investigate these competing views, I embed a field experiment in a startup bootcamp to test if networks that are plentiful in ideas lead to sustainable network- based performance advantages. Leveraging data on each participant’s creative potential, I use peer randomizations and detailed data on network formation to show that ties to more creative individuals improve team performance. Despite the performance benefits of such connections, I find little evidence that entrepreneurs strategically connect to others who have greater creative potential. Instead, entrepreneurs seek feedback from others on dimensions that are more socially salient and verifiable. Beyond providing causal evidence for the durability of network-based performance advantages, these findings provide micro-level support to the importance of knowledge spillovers within bootcamps, accelerators, and startup ecosystems more generally.

Keywords: Networks; Performance; Business Startups; Business Strategy;

Language: English

Format: Print

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Citation:

Koning, Rembrand. "Do Network Dynamics Undermine Idea-based Network Advantages? Experimental Results from an Entrepreneurship Bootcamp." Working Paper, August 2016.

We conduct a field experiment at an entrepreneurship bootcamp to investigate whether interaction with proximate peers shapes a nascent startup team's performance. We find that teams whose members lack prior ties to others at the bootcamp experience peer effects that influence the quality of their product prototypes. A one-standard-deviation increase in the performance of proximate teams is related to a two-thirds standard-deviation improvement for a focal team. In contrast, we find that teams whose members have many prior ties interact less frequently with proximate peers, and thus their performance is unaffected by nearby teams. Our findings highlight how prior social connections, which are often a source of knowledge and influence, can limit new interactions and thus the ability of organizations to leverage peer effects to improve the performance of their members.

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Do Network Dynamics Undermine Idea-based Network Advantages? Experimental Results from an Entrepreneurship Bootcamp

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