Judging foreign startups

11:00 am October 19, 2020

Online

Accelerators and investors evaluate entrepreneurial ideas in an increasingly global context. Can they pick the most promising startup ideas no matter their provenance? On the one hand, promising startup ideas might depend on universal principles like network effects or managerial skills, which judges can evaluate no matter the idea’s origin. On the other hand, the country of origin might matter. Local expertise may help judges better assess the quality of startups. Alternatively, home biases may interfere, leading judges to discount foreign startup ideas. We unpack these alternatives using unique data from the global round of a large accelerator in which multiple judges from different regions are randomly assigned to evaluate startups from across the globe. Our analysis of this natural experiment shows that judges are 4 percentage points less likely to recommend startups headquartered outside the judges’ home region. Further, judges’ discounting of foreign startups does not appear to be driven by their ability to better discern winners from losers among local versus foreign startups, but instead appears to bias them against picking promising foreign ideas. Additional information about a startup does not appear to attenuate this bias.

This event is open to faculty, doctoral students, academic researchers, and graduate students.

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