Do differences among accelerators explain differences in the performance of member ventures? Evidence from 117 accelerators in 22 countries

• Author: Pankaj C. Patel,Chien Sheng Richard Chan,Phillip H. Phan
• Date: 01 June 2020
• Published date: 01 June 2020
• DOI: http://doi.org/10.1002/sej.1351

RESEARCH ARTICLE

Do differences among accelerators explain

differences in the performance of member

ventures? Evidence from 117 accelerators

in 22 countries

Chien Sheng Richard Chan

1

| Pankaj C. Patel

2

| Phillip H. Phan

3

1

College of Business, Stony Brook University, Stony Brook, New York

2

Villanova School of Business, Villanova University, Villanova, Pennsylvania

3

Carey Business School, Johns Hopkins University, Baltimore, Maryland

Correspondence

Pankaj C. Patel, Villanova School of Business,

Villanova University, 800 Lancaster Ave.,

Villanova, PA 19085.

Email: pankaj.patel@villanova.edu

Abstract

Research Summary: Whether differences among accelera-

tors explain differences in the performance of member ven-

tures is an important and underexplored question.

Conversely, are the effects of accelerators so isomorphic,

because they copy each other, that ventures from different

accelerators report little performance differences? We use

variance decomposition analysis to test whether variations

in characteristics of accelerators explain performance differ-

ences in the ventures that belong to them. Using a sample

of 1,442 ventures from 117 accelerator programs across

22 countries, we find that 11.13–14.18% variance of ven-

ture performance can be attributed to accelerator member-

ship. Accelerator membership also accounted for 3.00, 5.15,

and 16.65% in the variance for employee growth, employee

costs, and revenue change, respectively. Our findings sug-

gest that between accelerator differences can make a signif-

icant economic difference to venture performance.

Managerial summary: For accelerator managers and

policymakers assessing if differences between accelerators

explain the differences in outcomes of member ventures is

All the authors contributed equally to this study.

Received: 7 February 2019 Revised: 5 February 2020 Accepted: 16 February 2020 Published on: 13 April 2020

DOI: 10.1002/sej.1351

© 2020 Strategic Management Society

224 wileyonlinelibrary.com/journal/sej Strategic Entrepreneurship Journal. 2020;14:224–239.

important. This article advances our understanding of differ-

ences among accelerators driving differences in perfor-

mance among their ventures. Using a sample of 1,442

ventures from 117 accelerator programs across 22 countries,

about 11% variance of venture performance can be attrib-

uted to accelerator membership. Overall, differences among

accelerators seem to explain meaningful differences in per-

formance among member ventures.

KEYWORDS

accelerator, global sample, performance, variance decomposition

1|INTRODUCTION

Early stage ventures often fail because of institutional illegitimacy, resource and capacity limitations, managerial inex-

perience, lack of market exposure, and competitive retaliation. Researchers and policymakers have experimented

with various mechanisms to attenuate these risks, one of which is business acceleration. Business accelerators, “aim

to accelerate the process of venture creation by providing specific services, focused on education and mentoring,

[through] an intensive program with limited duration”(Pauwels, Clarysse, Wright, & Van Hove, 2016, p. 13). Since

the first accelerator, Y-Combinator, was founded in 2005, the phenomenon has become so widespread that venture

acceleration has become an industry. According to findings in the Global Accelerator Report 2016, about 579 acceler-

ator programs made over $206 million worth of total investments worldwide in 11,305 startups.

1

Support for inno-

vation has always been a policy tool for economic development (Phan, Siegel, & Wright, 2016). Business acceleration

has become one of the latest such tools in a long history of public interventions to improve wealth creation in a

region.

Accelerators are localized property-based organizations, and so are “tuned”to their regional entrepreneurial

ecologies, which could include such factors as industry supply chains, the available talent pool, local regulations, and

demand patterns. The theory of business acceleration is relatively simple, yet the empirical evidence is unsettled.

Accelerators vary considerably in their services, ownership structures, access to investment funds, investment size,

professional expertise, geographic location, and size of resource network. Their “distinctive characteristics and pro-

files geared towards reinforcing business start-ups”(Pauwels et al., 2016, p. 13) are supposed to explain differences

in venture performance between accelerators (Birdsall, Jones, Lee, Somerset, & Takaki, 2013). However, the

increased popularity of accelerators across the world has been accompanied by the propagation and adoption of

“best practices.”The resulting isomorphism in accelerator morphology could reduce their explanatory power for vari-

ations in venture performance.

Due to variations in the combinations of human, financial, technological, community, and organizational

resources (Gassmann & Becker, 2006; Rothaermel & Thursby, 2005), previous estimates of the influence of accelera-

tors vary widely (Arena, Adams, Noyes, Rhody, & Noonan, 2008; Kemp & Weber, 2012). Differences among acceler-

ators, what we call “accelerator morphology,”could include but are not limited to organization structures, bespoke

resources, and locally adapted managerial processes. These differences may heighten the between-accelerator differ-

ences in accounting for venture performance (Cohen, Bingham, & Hallen, 2019). We offer a way of assessing these

estimates by exploiting variance decomposition techniques.

Given the largely descriptive nature of extant studies (with exceptions, including Gonzalez-Uribe & Leatherbee

(2018)), a variance decomposition analysis (VDA) could explain if accelerator morphology accounts for the

CHAN ET AL.225