Experimental Evidence of a Scientific Approach to Decision Making of Entrepreneurial Firms

Abstract

This study examines the impact of a scientific approach to decision making on early-stage entrepreneurial firms. In these early-stage projects, we argue that using a scientific approach to decision making leads to a higher chance to uncover false positives and false negatives associated with new business ideas. We hypothesize that this precision helps entrepreneurs to understand both if their ideas have negative financial returns and if tweaking their idea (pivot) can lead to more positive financial returns. We embed a field experiment in a pre-accelerator program geared towards early-stage entrepreneurial firms, and use this initiative to provide treatment to a group of entrepreneurs (130 entrepreneurial teams) by training them on how to use a scientific approach to business development. The control group (128 entrepreneurial teams) receives the same amount and type of training, but is not taught to use a scientific approach to business development. Consistently with our predictions, we find that the use...