Category Archives: 2023

Does diversity influence innovation and economic growth? It depends on spatial scale

Olav Sorenson

Diversity has been thought to influence innovation and economic growth in many ways. The mechanisms proposed as underlying these relationships interestingly operate at different spatial scales. Differing estimates across levels of spatial resolution therefore provide empirical insight into the processes underlying regional differences in innovation, entrepreneurship, and economic growth. After discussing these mechanisms and why they operate at different spatial scales, this essay revisits a number of the existing studies of diversity through this lens. Diversity appears to have had the largest effects at fine-grained scales, suggesting that its economic value to regions emerges most strongly from facilitating innovation and information exchange through serendipitous interactions.

Research in Organizational Behavior, 43: 100190

Summarized on the UCLA Anderson Review

Jockeys, horses or teams? The selection of startups by venture capitalists

Tekin Esen, Michael S. Dahl, and Olav Sorenson

How do venture capitalists select startups? Most research to date has focused on the attributes of either the founders (the jockey) or the business idea (the horse) as the determinants of selection. Connecting information from VentureXpert to the Danish registry data allows us to extend this analysis to include information on all employees of startups (the team). To assess the importance of these factors to access to venture capital, our analysis compares startups that received funding to other startups founded at the same time and in the same industry. Consistent with the jockey hypothesis and prior research, we find that firms with more and better educated founders have a higher probability of receiving venture capital. However, high-quality employees appear to matter even more than founders to the probability of being funded.

Journal of Business Venturing Insights, 19: e00383 (OPEN ACCESS)

Summarized on the UCLA Anderson Review

The Silicon Valley Syndrome

Doris Kwon and Olav Sorenson

How does expansion in the high-tech sector influence the broader economy of a region? We demonstrate that an infusion of venture capital in a region leads to: (i) declines in the number of establishments and in employment in non–high-tech industries in the tradable sector; (ii) increases in entry and in employment in the non-tradable sector; and (iii) a rise in income inequality in the non-tradable sector. Expansion in the high-tech sector therefore leads to a less diverse tradable sector and to increasing inequality in the region.

Entrepreneurship Theory & Practice, 47(2): 344-368.

Summarized on the UCLA Anderson Review

Summarized on Yale Insights