Tuesday, December 1, 2020

Sprinters or Legionnaires? Why Entrepreneurs Benefit from Collaboration

What happens when you put talented and ambitious people together? That is an important question in many contexts, and a currently popular version is accelerators for entrepreneurs. Accelerators select the most promising venture plans from many applicants, giving them a pool of talent and ambition. They have training programs, coaches, and access to industry and funding contacts, and their goal is to help the participating entrepreneurs produce valuable ventures. Importantly, accelerators also house the venture teams together and have them interact in the training program and during their regular work.

But how should we think about their interaction? In sports, talented and ambitious people are brought together because they improve through competition. Sprinters run faster, and gymnasts develop better routines. But people are also brought together because they improve through collaboration. Soccer teams fine-tune their attacks and defenses, and Caesar’s veterans were so coordinated that they could beat other Roman armies in the civil war. Competition and collaboration can both be effective, maybe even simultaneously, but which one is best for entrepreneurs?

Thanks to research by Rekha Krishnan, Karen S. Cook, Rajiv Krishnan Kozhikode, and Oliver Schilke published in Administrative Science Quarterly, we can now answer that question. They had access to an accelerator in Silicon Valley and followed three cohorts of selected ventures, with enough differences in training and other events that it was possible to discern the formula for success. The answer may be a surprise: entrepreneurs are legionnaires, not sprinters. Collaboration with other ventures in the cohort first improved their social connections and then improved their resource access.

How did this happen? The paper has such a rich description that I cannot do justice to it here, but the main events are easy to summarize. The training included exercises that can be described as bonding rituals, such as social or sporting events. Even a simple game such as talking about hobbies or other personal information can be a bonding event. They also included exercises that can be described as tournament rituals, such as reporting of their progress toward many goals, in front of all the others. Bonding rituals and tournament rituals had very different effects. Bonding rituals led to social interactions not organized by the accelerator and generated friendships and openness. This made it easier for the entrepreneurs to ask questions and share important information. Importantly, bonding rituals made entrepreneurs comfortable with giving valuable tips to each other without getting anything back in return.

And the tournament rituals? They became show of strengths, just like a 100-meter sprint is, and they failed to create friendships and social interaction. Even worse, tournament rituals made entrepreneurs think that valuable tips should not be given away for free – they should be traded. But of course, this does not work. Unlike goods, information cannot be priced and traded well, and two people rarely have needs for each other’s information at exactly the same time.

This is where the legionnaire entrepreneurs win. Tightly bonded, they are willing to give without asking for anything in return, but they still get much in return. Not at the same time, and often not even from the same entrepreneur, but they know that in a group that collaborates, everyone is better off. Maybe entrepreneurs are not so different from everyone else after all.

Krishnan, R., K. S. Cook, R. K. Kozhikode, and O. Schilke

2020 "An Interaction Ritual Theory of Social Resource Exchange: Evidence from a Silicon Valley Accelerator." Administrative Science Quarterly: forthcoming.