Divergent thinking and post-launch entrepreneurial outcomes: non-linearities and the moderating role of experience

Abstract Divergent thinking is the ability to produce numerous and diverse responses to questions or tasks, and it is used as a predictor of creative achievement. It plays a significant role in the business organization’s innovation process and the recognition of new business opportunities. Drawing upon the cumulative process model of creativity in entrepreneurship, we hypothesize that divergent thinking has a lasting effect on post-launch entrepreneurial outcomes related to innovation and growth, but that this relation might not always be linear. Additionally, we hypothesize that domain-specific experience has a moderating role in this relation. We test our hypotheses based on a representative longitudinal sample of 457 German business founders, which we observe up until 40 months after start-up. We find strong relative effects for innovation and growth outcomes. For survival, we find conclusive evidence for non-linearities in the effects of divergent thinking. Additionally, we show that such effects are moderated by the type of domain-specific experience that entrepreneurs gathered pre-launch, as it shapes the individual’s ideational abilities to fit into more sophisticated strategies regarding entrepreneurial creative achievement. Our findings have relevant policy implications in characterizing and identifying business start-ups with growth and innovation potential, allowing a more efficient allocation of public and private funds. @Plain English Summary: Divergent thinking is the ability to generate many different and novel ideas to solve tasks. When facing a challenge or a problem, divergent thinkers would explore different approaches in an unsystematic fashion in order to solve it. It is known that this cognitive ability plays a role in the innovation process of firms. However, what is its role in the entrepreneurial process itself, particularly in the last post-launch phase, where entrepreneurs seek survival through innovation and growth? Is the relation between divergent thinking and business outcomes linear? Are there other factors that exacerbate its role? Accounting for a variety of factors that might influence business outcomes, we find that divergent thinking has a positive effect on innovation and business growth 40 months after start-up, as well as evidence of non-linearities with respect to business survival. Furthermore, we find domain-specific experience to moderate the effect of divergent thinking on business performance in the post-launch phase. These results make a valuable contribution to the understanding of creativity and business performance and for public and private investors to identify and foster businesses with innovative and growth potential.