Research Corner

PROJECT RESEARCH RESULTS
Forthcoming Article in Journal of Financial Economics

As reported in the Wall Street Journal on November 8, 2006, a paper analyzing a subset of the data submitted to the Business Plan Archive will be published soon in the Journal of Financial Economics.

The paper is entitled "Was There Too Little Entry in the Dot Com Era?" If you are interested in reading a pre-publication draft, it is available on SSRN.com:

"Was There Too Little Entry in the Dot Com Era?"

And, yes, we argue that there may have been too few Dot Com companies formed during the late 1990s.

Feel free to disagree, but before you do, let me try to explain what we mean: Because many entrepreneurs and investors believed in Get Big Fast (GBF), entrepreneurs interested in starting companies might have chosen not to enter simply because someone else entered first pursuing GBF.

For most companies doing business online, GBF was not a good strategy. Therefore, much of the money invested in it was poorly spent. If we imagine the marginal investor standing on the sideline deciding whether or not to enter a given market space, that person might have shared in the belief in GBF and decided not to enter, when in fact, the early entrant was not destined to succeed, and the market could have supported a non-GBF player.

To the extent the marginal investor chose not to enter because of a mistaken belief in the supremacy of GBF, there actually was too little entry. Get it?



Posted by David Kirsch on Nov 14, 2006 | Comments (0)