NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sabrina T. Howell

NYU Stern School of Business
KMC 9-93
44 West 4th Street
New York, NY 10012

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NBER Program Affiliations: PR
NBER Affiliation: Faculty Research Fellow

NBER Working Papers and Publications

September 2017Learning from Feedback: Evidence from New Ventures
w23874
This paper explores how new venture competitions are helpful to entrepreneurs. In a regression discontinuity design using data from 87 competitions in 17 U.S. states, I show that winning is useful. While cash awards matter, winning is independently valuable in ways inconsistent with certification. Competitions instead seem to facilitate learning. I isolate learning by comparing lower and higher ranked non-winners across competitions in which they did and did not observe their standing. There is an economically large effect of negative feedback on venture abandonment. Cross-sectional variation suggests that founders treat their ventures as real options and are Bayesian updaters.
 
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