Why do some entrepreneurs thrive while others fail? We explore whether the advice entrepreneurs receive about people management influences their firm's performance. We conducted a randomized field experiment in India with 100 high-growth technology firms whose founders received in-person advice from other entrepreneurs who varied in their managerial style. We find that entrepreneurs who received advice from peers with an active approach to managing people–instituting regular meetings, setting goals consistently, and providing frequent feedback to employees–grew 28% larger and were 10 percentage points less likely to fail than those who got advice from peers with a passive people-management approach two years after our intervention. Entrepreneurs with MBAs or accelerator experience did not respond to this intervention, suggesting that formal training can limit the spread of peer advice.
When Does Advice Impact Startup Performance?
Policy implications
Peer learning might be fruitfully leveraged to increase employee growth, but not without a deeper understanding of selection processes. Ecosystems should make it easier to find and highlight managers with useful knowledge, one-to-one learning could be leveraged to disseminate knowledge more effectively.
Reference
Koning, R., Hasan, S., Delecourt, S., Chatterji, A. (2017). 'Learning to Manage: A Field Experiment in the Indian Startup Ecosystem'. Harvard Business School Strategy Unit Working Paper.