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https://doi.org/10.31235/osf.i...
Article . 2019 . Peer-reviewed
License: CC BY
Data sources: Crossref
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SSRN Electronic Journal
Article . 2019 . Peer-reviewed
Data sources: Crossref
Management Science
Article . 2023 . Peer-reviewed
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DBLP
Article . 2023
Data sources: DBLP
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Measuring Founding Strategy

Authors: Jorge Guzman; Aishen Li;

Measuring Founding Strategy

Abstract

We introduce a novel approach to measure the founding strategic differentiation of startups and its relationship to follow-on performance. We use natural language processing and historical websites to estimate the similarity between the founding website of an individual startup, the historical website of public firms at the startup's founding year, and the founding website of other startups founded in the same year. We propose that distance in the value proposition stated in these websites represents differentiation in the market. Startup differentiation is estimated as the average text-based distance from the five closest incumbents (public firms). We implement this approach using a large sample of startups from Crunchbase. Our measure predicts a meaningful increase in early stage financing and equity outcomes, unconditionally and controlling for cohort and industry fixed effects. The positive benefits of equity outcomes only evidence themselves after year 6 of age, suggesting more differentiated firms may take longer to prove themselves. Using out-of-sample tests, we also demonstrate that our measure is economically important, predicting 30% of the total variation in the receipt of early stage financing and 20% of variation in equity outcomes. Public datasets of our differentiation score and scraped website data are provided, together with open source code to replicate our approach in other settings.

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Keywords

bepress|Social and Behavioral Sciences|Economics, Economics, SocArXiv|Social and Behavioral Sciences|Economics|Other Economics, bepress|Social and Behavioral Sciences, SocArXiv|Social and Behavioral Sciences|Economics, bepress|Social and Behavioral Sciences|Economics|Other Economics, SocArXiv|Social and Behavioral Sciences, Social and Behavioral Sciences, Other Economics

  • BIP!
    Impact byBIP!
    selected citations
    These citations are derived from selected sources.
    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    54
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Top 1%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    Top 10%
    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Top 10%
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
54
Top 1%
Top 10%
Top 10%
hybrid