Biased sampling of early users and the direction of startup innovation

Ruiqing Cao, Rembrand Koning and Ramana Nanda
Additional contact information
Rembrand Koning: Harvard Business School

No g6wjn, SocArXiv from Center for Open Science

Abstract: Using data from a prominent online platform for launching new digital products, we document that the composition of the platform's `beta testers' on the day a new product is launched has a systematic and persistent impact on success. Specifically, we use word embedding methods to classify products launched on this platform as more or less focused on the needs of female customers, and show that female-focused products launched on a typical day—when nine-in-ten users on the platform are men—experience 40% less growth and are 5 percentage points less likely to have an any users a year after launch. Using exogenous variation driven by the platform's daily newsletter, we find that that the product gender gap shrinks on days when women are more likely to engage with the platform. Conversely, entrepreneurs who happen to launch a female-focused product on an especially male-dominated day reduce their product development efforts by roughly 30% and are 4 percentage points less likely to raise venture funding. Overall, our findings suggest that sample bias can systematically corrupt signals of a startup's market potential, bias entrepreneurial strategy, and so lead to a dearth of innovations aimed at consumers who are underrepresented among early-users.

Date: 2020-11-06
New Economics Papers: this item is included in nep-ent, nep-ict and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://osf.io/download/5fa98e48d1894f017b68b3b3/

Related works:
Working Paper: Biased sampling of early users and the direction of startup innovation (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:g6wjn

DOI: 10.31219/osf.io/g6wjn

Access Statistics for this paper

More papers in SocArXiv from Center for Open Science
Bibliographic data for series maintained by OSF ().