Prior ties and the limits of peer effects on startup team performance

Abstract

Research SummaryWe conduct a field experiment at an entrepreneurship bootcamp to investigate whether interaction with proximate peers shapes a nascent startup team's performance. We find that teams whose members lack prior ties to others at the bootcamp experience peer effects that influence the quality of their product prototypes. A 1‐SD increase in the performance of proximate teams is related to a two‐thirds SD improvement for a focal team. In contrast, we find that teams whose members have many prior ties interact less frequently with proximate peers, and thus their performance is unaffected by nearby teams. Our findings highlight how prior social connections, which are often a source of knowledge and influence, can limit new interactions and thus the ability of organizations to leverage peer effects to improve the performance of their members. Managerial SummaryResearchers and policymakers believe that accelerators, incubators, and bootcamps help entrepreneurial ecosystems spur innovation and drive startup growth. The effectiveness of these organizations, in large part, depends on the new social interactions fostered among colocated entrepreneurs. Yet, little evidence exists about the extent to which such interactions actually lead to spillovers. We ran a controlled experiment at a startup bootcamp to investigate when entrepreneurs were most affected by their colocated peers. Not everyone benefited. We found that entrepreneurs with many prior ties to others at the bootcamp made fewer new connections, especially to neighboring peers, and thus did not experience significant spillovers. In contrast, those without prior connections experienced the greatest spillovers because they interacted frequently with people on nearby colocated teams. Our findings highlight how organizations like incubators and bootcamps, designed to foster new connections, might sometimes just reinforce old networks.