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Market-Based Solutions to Vital Economic Issues
Research
Jul 23, 2018

The Role of Accelerator Designs in Mitigating Bounded Rationality in New Ventures

Abstract

Using a nested multiple-case study of participating ventures, directors, and mentors of eight of the original U.S. accelerators, we explore how accelerators’ program designs influence new ventures’ ability to access, interpret, and process the external information needed to survive and grow. Through our inductive process, we illuminate the bounded-rationality challenges that may plague all ventures and entrepreneurs—not just those in accelerators—and identify the particular organizational designs that accelerators use to help address these challenges, which left unabated can result in suboptimal performance or even venture failure. Our analysis revealed three key design choices made by accelerators—(1) whether to space out or concentrate consultations with mentors and customers, (2) whether to foster privacy or transparency between peer ventures participating in the same program, and (3) whether to tailor or standardize the program for each venture—and suggests a particular set of choices is associated with improved venture development. Collectively, our findings provide evidence that bounded rationality challenges new ventures differently than it does established firms. We find that entrepreneurs appear to systematically satisfice prematurely across many decisions and thus broadly benefit from increasing the amount of external information searched, often by reigniting search for problems that they already view as solved.


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