Abstract
Why do some newly founded ventures succeed, while others fail? To address this fundamental question in entrepreneurship field, we focus on the role of cognitive ability, and specifically how it influences selecting founding team members. We use a near-exhaustive sample of male Swedish entrepreneurs with available data on their cognitive ability. After controlling for non-cognitive ability of entrepreneurs, our results suggest that one standard deviation increase in cognitive ability of entrepreneurs is associated with about %23 increase in sales. This effect is significantly larger for entrepreneurs in high-tech industries relative to entrepreneurs in low-tech industries. This relationship is further mediated by founding team size and their collective cognitive abilities. Our study highlights dependence of new ventures’ growth on entrepreneurs’ talent to assemble high-quality founding teams.
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