Are New Venture Competitions Useful?

Sabrina T. Howell

NBER Working Paper No. 23874
Issued in September 2017, Revised in June 2018
NBER Program(s):Corporate Finance, Industrial Organization, Productivity, Innovation, and Entrepreneurship

This paper uses administrative data from 87 new venture competitions in 17 U.S. states to show that winning has large, positive effects on measures of subsequent venture success, including employment and financing. While cash prizes are valuable, especially for founders who are likely financially constrained, winning is independently useful. Certification may be one mechanism, but it does not seem to be the primary one. An alternative is that competitions help entrepreneurs learn about their projects’ quality. Receiving negative feedback is shown to increase venture abandonment, suggesting that competitions are useful in part because they facilitate faster type revelation.

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Document Object Identifier (DOI): 10.3386/w23874

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