Understanding the process of knowledge accumulation and entrepreneurial learning in startups

ABSTRACT

This paper investigates the process of how entrepreneurs learn. The study uses longitudinal data on about 5,000 startups and presents evidence that entrepreneurial learning happens rapidly in the initial years of setting up a business, before settling down to a steady-state phase. The data show that entrepreneurs assign a higher weight, around 30%, to market signals in early years and with time this weight declines to about 16% in the sixth year, when prior information gains more bearing in decision-making. Specifically, the study substantiates the claim of existing theories and argues that over time, entrepreneurs learn to maintain the delicate balance between prior learning and new information from the market. Furthermore, results also indicate the presence of learning heterogeneity across entrepreneurs, possibly explaining the need for diversity in assistance programmes to meet the requirements of startups.

KEYWORDS:

• Learning
• information and knowledge
• Bayesian analysis
• startups
• entrepreneurship

JEL:

• D83
• C11
• M13
• L26

Disclosure statement

No potential conflict of interest was reported by the author.