Innovation, Managerial Effort, and Start-Up Performance

Managers of start-up firms make a number of important yet understudied decisions, such as whether or not to develop a new product, whether or not to choose a high-technology product or service, whether or not to use external assistance, and the amount of time and effort they will devote to their new company. These choices are informed by their access to various resources, such as the size of the management team, its education level, its previous experience working at start-ups, and other attributes. In this paper we consider how these resources influence optimal provision of effort, and examine decisions about innovative behavior (i.e., to market a novel or high-technology product) and managerial exertion (i.e., the hours per week spent by the managers and their decision to supplement their own efforts by employing external assistance such as consulting services).