Entrepreneurship

Entrepreneurship is a featured research topic and an initiative at Harvard Business School

Our long tradition of research in Entrepreneurship goes back to the 1930's and 1940's with the “the father of venture capitalism,” General Georges Doriot, and Joseph Schumpeter’s theory of innovation as a process of “creative destruction.” Building on our intellectual roots, our scholars come from disciplines including economics, finance, sociology, strategy, business history, management, and social entrepreneurship. A number of our faculty come from practice as venture capitalists and start-up founders. We focus our research on the identification and pursuit of entrepreneurial opportunities; domestic and international funding of entrepreneurial endeavors; innovation, particularly technological innovation in international ventures; the environments in which entrepreneurs make decisions; and social entrepreneurship. As our research contributes new insights, we are advancing the world’s understanding of complex entrepreneurial issues and helping to increase the entrepreneurial success of our students and practitioners worldwide.

Featured Works

Article | Journal of Economic Perspectives
Entrepreneurship as Experimentation
William R. Kerr, Ramana Nanda and Matthew Rhodes-Kropf
Entrepreneurship research is on the rise, but many questions about its fundamental nature still exist. We argue that entrepreneurship is about experimentation: the probabilities of success are low, extremely skewed, and unknowable until an investment is made. At a macro level, experimentation by new firms underlies the Schumpeterian notion of creative destruction. However, at a micro level, investment and continuation decisions are not always made in a competitive Darwinian contest. Instead, a few investors make decisions that are impacted by incentive, agency, and coordination problems, often before a new idea even has a chance to compete in a market. We contend that costs and constraints on the ability to experiment alter the type of organizational form surrounding innovation and influence when innovation is more likely to occur. These factors not only govern how much experimentation is undertaken in the economy, but also the trajectory of experimentation, with potentially very deep economic consequences.
Keywords: Entrepreneurship; Innovation and Invention;

Citation:
Kerr, William R., Ramana Nanda, and Matthew Rhodes-Kropf. "Entrepreneurship as Experimentation." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 25–48. View Details
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Case | HBS Case Collection | January 2014 (Revised October 2014)
Andreessen Horowitz
Thomas R. Eisenmann and Liz Kind
Andreessen Horowitz (a16z), a venture capital firm launched in 2009, has quickly broken into the VC industry's top ranks, in terms of its ability to invest in Silicon Valley's most promising startups. The case recounts the firm's history; describes its co-founders' motivations and their strategy for disrupting an industry in the midst of dramatic structural change; and asks whether a16z's success to date has been due to its novel organization structure. a16z's 22 investment professionals are supported by 43 recruiting and marketing specialists—an "operating team" that is an order of magnitude larger than that of any other VC firm. Furthermore, the operating team aims to not only assist a16z portfolio companies, but also to be broadly helpful to all parties in the Silicon Valley ecosystem, including search firms, journalists, PR agencies, and Fortune 500 executives. The bet: by providing "no-strings-attached" help to ecosystem partners, the partners might someday reciprocate by steering founders seeking funding to a16z. The case closes by asking whether a16z should seek to double its scale over the next years.
Keywords: Business Model; Venture Capital; Disruption; Entrepreneurship; Industry Structures; Financial Services Industry; California;

Citation:
Eisenmann, Thomas R., and Liz Kind. "Andreessen Horowitz." Harvard Business School Case 814-060, January 2014. (Revised October 2014.) (request a courtesy copy.) View Details
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Background Note | HBS Case Collection | February 2014
Raising Startup Capital
Jeffrey Bussgang
Entrepreneurs typically focus their full energies on business-building. But raising capital is a core part of building a valuable business. Developing expertise in raising capital is more than a necessary evil, it is a competitive weapon. Master it and you will be in a better position to make your company a massive success. But how do you finance a new venture? In this note, I will try to help answer this question by addressing the following topics:
• Types of funding. The two major types of startup capital are equity funding and debt funding although there are a few hybrid flavors as well.
• Sources of funding. These include venture capital firms, angel investors, crowd-funding, and accelerators/incubators.
• What investors look for. Each source has a different funding process and set of criteria which you need to understand before seeking funding from that source.
• The mechanics of equity funding. Seeking and securing funding involves setting amounts, agreeing to terms, and defining relationships.
Keywords: fund raising; venture capital; venture capital term sheet; venture creation/development; venture investing; venture philanthropy; entrepreneurial finance; entrepreneurial management; entrepreneurs; entrepreneurship; Jumpstart Our Business Startups (JOBS) Act; Non-equity financing; Convertible notes; convertible debt; debt financing; Raising Capital; National Venture Capital Association; venture capital firm compensation; crowdfunding; crowd-funding; Startup; start-up; startup management; Startups; angel investors; angels; accelerator; Venture Capital; Financing and Loans; Entrepreneurship; Business Startups; Financial Services Industry; United States;

Citation:
Bussgang, Jeffrey. "Raising Startup Capital." Harvard Business School Background Note 814-089, February 2014. View Details
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Article | Review of Financial Studies | January 2014
The Consequences of Entrepreneurial Finance: Evidence from Angel Financings
William R. Kerr, Josh Lerner and Antoinette Schoar
This paper documents that ventures that are funded by two successful angel groups experience superior outcomes to rejected ventures: they have improved survival, exits, employment, patenting, web traffic, and financing. We use strong discontinuities in angel funding behavior over small changes in their collective interest levels to implement a regression discontinuity approach. We confirm the positive effects for venture operations, with qualitative support for a higher likelihood of successful exits. On the other hand, there is no difference in access to additional financing around the discontinuity. This might suggest that financing is not a central input of angel groups.
Keywords: Business Ventures; Financing and Loans; Interests; Employment; Patents; Web; Operations; Entrepreneurship; Business Exit or Shutdown;

Citation:
Kerr, William R., Josh Lerner, and Antoinette Schoar. "The Consequences of Entrepreneurial Finance: Evidence from Angel Financings." Review of Financial Studies 27, no. 1 (January 2014): 20–55. View Details
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Case | HBS Case Collection | September 2014 (Revised December 2014)
The Ullens Center for Contemporary Art
Mukti Khaire and Nancy Hua Dai
Since its opening in Beijing in November 2007 as the first non-profit art center in China, UCCA had been operating with the mission to "promote the continued development of the Chinese art scene, foster international exchange, and showcase the latest in art and culture to hundreds of thousands of visitors each year." For the past six years, UCCA had worked with more than 100 artists and designers to present 87 art exhibitions and 1,826 public programs to over 1.8 million visitors, including many important leaders from all over the world. Given the context of the economic and political environment in the rapidly changing Chinese art market, the founders and senior management of UCCA wondered what they could do to achieve growth and financial viability while continuing to realize their mission.
Keywords: art world; art gallery; art market; Arts; Nonprofit Organizations; Entrepreneurship; China;

Citation:
Khaire, Mukti, and Nancy Hua Dai. "The Ullens Center for Contemporary Art." Harvard Business School Case 815-022, September 2014. (Revised December 2014.) View Details
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Discussion Paper | 2014
The Promise of Microfinance and Women's Empowerment: What Does the Evidence Say?
Dina D. Pomeranz
The microfinance revolution has transformed access to financial services for low-income populations worldwide. As a result, it has become one of the most talked-about innovations in global development in recent decades. However, its expansion has not been without controversy. While many hailed it as a way to end world poverty and promote female empowerment, others condemned it as a disaster for the poor. Female empowerment has often been seen as one of the key promises of the industry. In part, this is based on the fact that more than 80% of its poorest clients, i.e., those who live on less than $1.25/day, are women. This paper discusses what we have learned so far about the potential and limits of microfinance and how insights from research and practice can help inform the industry's current products, policies and future developments.
Keywords: Microfinance; Entrepreneurship in emerging markets; entrepreneurship; gender; Women's Empowerment; entrepreneurs; Saving; savings; credit; credit supply; Insurance; Development economics; development finance; Behavioral economics; Gender; Microfinance; Social Entrepreneurship; Developing Countries and Economies; Banking Industry; Public Administration Industry; Financial Services Industry; Insurance Industry; Latin America; Kenya; Chile; India; Asia; Africa;

Citation:
Pomeranz, Dina D. "The Promise of Microfinance and Women's Empowerment: What Does the Evidence Say?" EY Thought Leadership Series, February 2014. View Details
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Recent Publications

Working Paper | 2019
Keeping the Little Guy Down: A Debt Trap for Lending with Limited Pledgeability
Ernest Liu and Benjamin N. Roth
Microcredit and other forms of small-scale ﬁnance have failed to catalyze entrepreneurship in developing countries. In these credit markets, borrowers and lenders often bargain over not only the division of surplus but also contractual ﬂexibility. We show these lending relationships may lead to endogenous poverty traps for poor borrowers if future income is not pledgeable, yet richer borrowers unambiguously beneﬁt. Improving the bargaining position of rich borrowers can harm poor borrowers, as the lender tightens restrictions and prevents them from growing. The theory rationalizes the low average impact and low demand of microﬁnance despite its high impact on larger businesses.
Keywords: Entrepreneurship; Developing Countries and Economies; Microfinance; Problems and Challenges;

Citation:
Liu, Ernest, and Benjamin N. Roth. "Keeping the Little Guy Down: A Debt Trap for Lending with Limited Pledgeability." Working Paper, March 2019. View Details
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Article | Strategic Management Journal | 2018
Prior Ties and the Limits of Peer Effects on Startup Team Performance
Sharique Hasan and Rembrand Koning
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.
Keywords: field experiment; peer effects; office space; Knowledge Spillovers; accelerators; Entrepreneurship; Knowledge Sharing; Performance; Technology Industry; India;

Citation:
Hasan, Sharique, and Rembrand Koning. "Prior Ties and the Limits of Peer Effects on Startup Team Performance." Strategic Management Journal 40, no. 9 (September 2019): 1394–1416. View Details
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Case | HBS Case Collection | August 2019
Rand Fishkin at Moz (A)
Thomas R. Eisenmann
In 2016, senior management at Moz, a venture capital-backed startup providing software tools for digital marketing professionals, must decide how to address a looming cash flow crisis precipitated by failed efforts to broaden its product line. Seattle-based Moz had originally focused only on search engine optimization (SEO) software. Aiming to accelerate growth, over the past three years the startup had launched products targeted at content marketers, social media marketers, and small local businesses. Adoption of these new products had been disappointing, and the resource drain and distraction of launching them had reduced the growth of Moz's core SEO product. Management was wrestling with whether to either: 1) shut down or sell the new products; or 2) double down on the new products, funding further investment in them by selling the core SEO business or milking it as a "cash cow."
Keywords: Startups; scaling; Entrepreneurship; Failure; Business Startups; Diversification; Growth Management; Technology Industry;

Citation:
Eisenmann, Thomas R. "Rand Fishkin at Moz (A)." Harvard Business School Case 820-002, August 2019. View Details
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Case | HBS Case Collection | July 2019
Instabeat - One More Lap?
Shikhar Ghosh, Nicole Tempest Keller and Alpana Thapar
This case follows Lebanese entrepreneur, Hind Hobeika, an engineer and competitive swimmer who spends seven years trying to launch a wearable heartrate monitor and motion sensor to help swimmers track their performance while swimming. While the Beirut-based entrepreneur gained initial traction soon after founding her company Instabeat in September 2011, winning $150,000 in prize money from business plan competitions and raising $100,000 from a local venture capital firm, Hobeika soon faced a series of set-backs in trying to manufacture the product. Given the complexity of the hardware product she was trying to build, Hobeika had invested a significant amount of capital in the manufacturing design and had faced continuous delays. In addition, the product was not proving to be economically viable. By early 2016, Hobeika was out of money and had to let her team go. The business issues had also taken a toll on her personal life. However, Hobeika saw a potential path forward. The VC who had originally backed her was closing a new round of funding and was willing to discuss another potential round. More importantly, while in London, she had recently met Alex Asseily, a prominent Lebanese-British entrepreneur who encouraged her to stay the course. He suggested that she relocate to San Francisco, where he would soon be based, and offered to help her. Would it be worthwhile to leave everything behind, relocate, and rebuild the business? Hobeika had to decide—should she continue or not? If so, under what circumstances? If not, what would she do next?
Keywords: Startup; manufacturing; prototyping; female protagonist; Business Startups; Decision Making; Entrepreneurship; Hardware; Technology; Design; Organizational Culture; United States; Lebanon;

Citation:
Ghosh, Shikhar, Nicole Tempest Keller, and Alpana Thapar. "Instabeat - One More Lap?" Harvard Business School Case 820-005, July 2019. View Details
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Book | 2019
VC: An American History
Tom Nicholas
An exploration of venture financing in America, from its origins in the whaling industry to the rise of Silicon Valley, that shows how venture capital (VC) created an epicenter for the development of high-tech innovation. The VC industry arose from the United States’ long-running orientation toward entrepreneurship and a faith in low-probability but substantial financial payoffs. Whether the investment opportunity is a whaling voyage setting sail from New Bedford or the newest startup in Silicon Valley, VC is not just a model of finance that has proven difficult to replicate in other countries, it is a state of mind exemplified by an appetite for risk-taking, a bold spirit of adventure, and an unbridled quest for improbable wealth through investment in innovation.
Keywords: innovation; Venture Capital; Innovation and Invention; Entrepreneurship; History; United States;

Citation:
Nicholas, Tom. VC: An American History. Cambridge, MA: Harvard University Press, 2019. View Details
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Case | HBS Case Collection | July 2019
Osaro: Picking the Best Path
William R. Kerr, James Palano and Bastiane Huang
The founder of Osaro saw the potential of deep reinforcement learning to allow robots to be applied to new applications. Osaro targeted warehousing, already a dynamic industry for robotics and automation, for its initial product – a system which would allowed robotic arms to “pick and place” individual items into boxes that would be shipped to consumers. Despite receiving significant attention in the robotics space, the problem of universal “picking” had not been solved. Osaro believed deep reinforcement learning was the key to allowing robots to handle the complexity involved in perceiving and grasping a wide range of objects.

The case discussion will focus on the decision to choose the warehouse automation market, provide an overview of key machine learning concepts, and introduce students to some of the contours of competing in the machine learning space during the late 2010s. The case can also introduce key concepts for thinking about how the combination of artificial intelligence and robotics will change work in the future.
Keywords: artificial intelligence; Machine learning; robotics; robots; ecommerce; fulfillment; Warehousing; AI; Startup; technology commercialization; Business Startups; Entrepreneurship; Logistics; Order Taking and Fulfillment; Technology; Commercialization; Learning; Complexity; Competition;

Citation:
Kerr, William R., James Palano, and Bastiane Huang. "Osaro: Picking the Best Path." Harvard Business School Case 820-012, July 2019. View Details
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Case | HBS Case Collection | June 2019
ClearLife: From Prospect to Platform
Alexander Braun, Lauren Cohen, Mauro Elvedi and Jiahua Xu
ClearLife’s first product was a trading and analytics platform for participants in the US life settlement market, the secondary market for life insurance. ClearLife played a key role in facilitating transactions and devising a common language for expressing value and risk in this alternative asset class, and soon became the leading service provider in this market. After six years, ClearLife began to search for new business opportunities and identified the equity release market as particularly promising: ClearLife could leverage its experience in handling longevity-linked assets, and there were no strong competitors in sight. Nevertheless, this small enterprise faced the risk and challenges associated with allocating its limited resources to expanding the business. Students studying this case explore the factors underpinning the attempt of an InsurTech company trying to diversify.
Keywords: Corporate Entrepreneurship; Transition; Business Model; Financing and Loans; Insurance Industry; Technology Industry; Financial Services Industry; United Kingdom;

Citation:
Braun, Alexander, Lauren Cohen, Mauro Elvedi, and Jiahua Xu. "ClearLife: From Prospect to Platform." Harvard Business School Case 219-119, June 2019. View Details
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Case | HBS Case Collection | June 2019
Parrot: Navigating the Nascent Drone Industry
Rory M. McDonald, Emilie Billaud and Vincent Marie Dessain
In 2018, Henri Seydoux, CEO and Founder of Parrot, believed that his company was at an inflection point in its history. Parrot had been a European leader in consumer electronics since the 1990s, first developing Bluetooth kits for cars before moving on to electronic toys and, significantly, the AR Drone in 2010 — a remote-controlled quadcopter that was way ahead of its time. In the years that followed, Parrot’s sales volumes and popularity quickly increased. But new players were entering the market. Giant Chinese rival DJI, in particular, aggressively lowered its prices, forcing weaker companies out of the market. If Parrot was to survive the shakeout, Seydoux would have to figure out how to compete in an industry where even well-capitalized companies were collapsing. The questions that he faced were both strategic and urgent. Where to compete and how to win?
Keywords: Forecasting and Prediction; Disruption; Entrepreneurship; Corporate Strategy; Technological Innovation; Leading Change; Competitive Advantage; Technology; Competitive Strategy; Consumer Products Industry; Electronics Industry; Entertainment and Recreation Industry; Motion Pictures and Video Industry; Technology Industry; Video Game Industry; Europe; France; Paris;

Citation:
McDonald, Rory M., Emilie Billaud, and Vincent Marie Dessain. "Parrot: Navigating the Nascent Drone Industry." Harvard Business School Case 619-085, June 2019. View Details
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Case | HBS Case Collection | June 2019
Roger Federer's TEAM8: Launching the Laver Cup
Anita Elberse
Roger Federer, widely regarded as the best tennis player in the history of the sport, walked onto the court to thunderous applause during in the second edition of the Laver Cup in September 2018. Named after tennis legend Rod Laver, the Cup pitted many of the greatest players from Europe against those from the rest of the world. Federer was more than one of the Laver Cup’s main stars—he was an owner and co-creator. In fact, the idea for the event had originated in his boutique company TEAM8, which he co-founded in 2013 with his agent and business partner Tony Godsick. The Laver Cup’s success had not gone unnoticed in the world of tennis. With traditional tennis tournaments such as the Davis Cup attracting new investors and with governing bodies such as the Association of Tennis Professionals planning to relaunch their team event, the competition for top players and for desirable slots on an already very full tennis calendar was stronger than ever before. Was TEAM8’s Laver Cup well positioned for long-term success?
Keywords: superstars; tennis; tournaments; Entrepreneurship; Sports; Competitive Strategy; Value Creation; Sports Industry;

Citation:
Elberse, Anita. "Roger Federer's TEAM8: Launching the Laver Cup." Harvard Business School Case 519-093, June 2019. View Details
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Case | HBS Case Collection | June 2019
Athena Bancorp (Brief Case)
Leonard A. Schlesinger and Sarah Abbott
Athena Bancorp was founded in 2016 by Beth Daniels, a banking professional with 15 years of experience in the industry. Daniels took advantage of what she perceived as a gap in the market caused by recent industry consolidation, a decreasing industry focus on branch banking, and tighter lending standards. Athena has an aggressive growth goal—"to grow to 15 branches, with loans and deposits increasing by threefold over the next five years." However, the bank's operating philosophy centers on a high-touch approach, and it relies on dedicated, highly capable employees who are willing to work long hours. Burnout is setting in at the branch level and morale is declining. Daniels and her leadership team are struggling to hire enough employees to execute this strategy. The case illustrates a company whose success is driven primarily by its human resources (HR) strategy. It also highlights the opportunities and challenges of operating a service business with a high performance/high commitment culture. The case can be used to discuss topics such as leadership, management, organizational culture, strategy, motivation, and entrepreneurs. It is recommended for upper-level undergraduate students or MBA students in courses focused on organizational behavior, general management, human resource management, leadership, or entrepreneurship.
Keywords: Banks and Banking; Entrepreneurship; Growth and Development Strategy; Organizational Culture; Human Resources; Strategy; Service Delivery; Banking Industry;

Citation:
Schlesinger, Leonard A., and Sarah Abbott. "Athena Bancorp (Brief Case)." Harvard Business School Brief Case 919-517, June 2019. View Details
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