Published in Journal of Financial Economics
Why is high-growth entrepreneurship scarce in developing countries? Does this scarcity reflect firm capabilities constraints? We explore these questions using as a laboratory an accelerator in Colombia that selects participants using scores from randomly assigned judges and offers them training, advice, and visibility, but no cash. Exploiting exogenous differences in judges’ scoring generosity, we show that alleviating constraints to firm capabilities unlocks innovative entrepreneurs’ potential, but does not transform subpar ideas into high-growth firms. The results demonstrate that some high-potential entrepreneurs in developing economies face firm capabilities constraints, and that accelerators can help identify these entrepreneurs and boost their growth.
Juanita Gonzalez-Uribe and Santiago Reyes