Theoretical Frameworks
Spillover Effects on Venture Capital Activity
The range of potential effects of startup accelerators are still not entirely known, but a growing body of research suggests that startup accelerators can have spillover effects upon venture capital activity entrepreneurial ecosystems. More specifically, evidence has shown that accelerators can have a significant effect on high growth entrepreneurship in a region beyond the direct effects it has on individual startups that participate in the program. Even when excluding startups that participated in accelerators from the data, the evidence demonstrates that the arrival of an accelerator in a region resulted in a significantly greater number of venture-backed startups and total venture capital funding in the region. In addition, analysis of venture capital data also showed a significant relationship with the arrival of accelerators and the number of distinct investors in a region, as well as local investment groups. The researchers behind this study posit that this effect is most likely due to the fact that accelerators minimize search costs for venture capital investors, as well as contribute to the supply of investment-potential startups in the region.
Moreover, existing literature on venture capital spillover effects supports policymakers’ hopes that interventions such as accelerators can support regional entrepreneurship and innovation. Some literature evaluating Start-Up Chile and other specific programs even suggest that these accelerators are already “effective,” but policymakers should be cautious of the fact that these studies are limited to studying its effects at the firm level. Although the program may have a positive impact on individual firms, it has been argued that individual firms can even have a negative or indeterminate effect on local economies. Therefore, a study of regional spillover effects is more consistent with the overarching goals of policymakers and the Start-Up Chile program: not to simply grow individual businesses but also nurture the encompassing entrepreneurial ecosystem that is conducive to long-term increases in innovation and economic growth. I hypothesize that the notion of spillover effects upon venture capital markets can also be applied to the case of Start-Up Chile, and that the arrival of the accelerator program in 2010 resulted in benefits for both accelerator participants and the greater development of the Chilean entrepreneurial cluster. In line with the methods utilized in past literature, I plan to test this hypothesis through the measurement of venture capital activity in Chile in relation to the arrival of the Start-Up Chile program.
Social, Peer Effects on Entrepreneurial Activity
In addition to significant research supporting the clustering of entrepreneurship and innovation, research has also suggested that peer effects may play a role in fomenting entrepreneurial intentions amongst a population. In essence, greater exposure to successful entrepreneurs can shift social perception towards the belief that becoming an entrepreneur is actually a feasible career. This is mainly due to the fact that entrepreneurship is typically associated with high risks if the venture fails, and this potential cost often disincentivizes people from engaging in entrepreneurship. This role model or peer effect is also cited as one of the potential reasons underlying gender gaps in entrepreneurship, as evidence shows women and men are highly influenced by those engaging in entrepreneurial activity in their personal networks and especially those of the same gender. Additionally, multiple studies also demonstrate evidence for peer effects in family, work, and university settings. As more research on the topic is conducted, peer effects seems to be a viable mechanism for entry into entrepreneurial endeavors.
Building on this research, the arrival of accelerator programs and the entrepreneurs that come with it imply that peer effects may result in greater entrepreneurial activity in regions where startup accelerators exist. Contingent with the goal of policymakers to create entrepreneurial clusters that lead to economic growth, examining the potential peer effects of accelerator programs may lead to evidence that can inform future entrepreneurship and innovation policy interventions. Therefore, I posit that the arrival of Start-Up Chile along with the immigration of foreigners participating in the program, has resulted in peer effects that have contributed to greater entrepreneurial activity in Chile since 2010. I plan to test this hypothesis by longitudinally measuring levels of entrepreneurial activity and also conducting qualitative interviews with various actors in the Chilean entrepreneurial cluster.