Abstract
Entrepreneurial support programs have been implemented over the last decades to foster innovative entrepreneurs in developed and developing countries. Usually, these programs are carried by local business accelerators that provides cash and support services in terms of training, mentorship, access to contacts, among others. While there is some evidence that this type of interventions can foster innovative entrepreneurs , it is still unknown what are the mechanisms that drive the ventures’ growth.
Gonzalez-Uribe and Reyes (2020) explores whether providing support services (training, mentorships, etc.) and no cash have an impact on ventures’ success. This paper finds that innovative entrepreneurs face different constraints besides financial ones. Entrepreneurs that received non-monetary support increased their annual sales by 66% during the three following years after the intervention. However, it is still not clear how those interventions affect the entrepreneurs. Is it because it provides them with managerial capital (a la Bloom and Van Reenen, 2010; Bruhn, Karlan, and Schoar, 2010) so they can run their businesses more efficiently? Or is it because it provides them with entrepreneurial capital (a la Gonzalez-Uribe and Leatherbee, 2018) so they can discover and capture valuable opportunities more effectively?
As well-known practitioners such as Steve Blank have declared, “new ventures are not small versions of large companies.” Implicit in this statement is the idea that the knowledge required to manage a large company is different to the knowledge required to build a new venture. In fact, it implicitly highlights the hypothesis that applying the knowledge that is effective for managing a large company to a new venture can, in fact, be detrimental. Understanding the validity of this hypotheses is paramount for all initiatives that aim at fostering the creation and development of new ventures. If providing entrepreneurs managerial capital is as –or more– effective than providing them with entrepreneurial capital, then many programs that are currently doing so should stick to the status quo. However, if providing managerial capital to entrepreneurs is detrimental and, in contrast, providing them with entrepreneurial capital improves value creation and socioeconomic development, then many entrepreneurship-promotion initiatives may, in fact, require an urgent pivot in their provision of this type of capital.
The answer to this question will have large implications on how to run entrepreneurship support programs. In order to disentangle the effects of managerial versus entrepreneurial capital, we will provide equivalent groups of entrepreneurs unique treatments which aim to endow them with one or the other type of capital. Subsequently, we will compare how each group fares in terms of performance, growth and job creation.