Does Experience Determine Performance?

Does Experience Determine Performance?


This research paper presents the analysis of current literature with regards to how experience can influence performance. Even though experience positively impacts performance, results tend to vary. Over the past several decades, much focus has been put in understanding the characteristics of entrepreneurial selection and performance in business literature. The author asserts that a great deal of literature explores characteristics of the entrepreneur in relation to financial, human and social factors that determine performance. Notably, investment in human capital seems to enhance entrepreneurial performance. Human capital entails the skills, education and experience which a firm or individual invests in. Education emerged as a prominent feature of human capital as various studies show the impact of educational attainment on entrepreneurial selection and performance as being positive. This research indicates that education positively influences the overall performance but, it does not impact the decision of becoming an entrepreneur.

The research analyses various empirical studies that measure the effect of experience in on entrepreneurial performance in industrial countries to shed new light on the experience-performance relationship. The meta-analysis uses statistical techniques to determine specific factors that determine the variance in results with regards to experience and performance.  Correspondingly. There is a great deal of variation in the results which experience-performance relationship is tested based on the facts that several difficulties have arisen in drawing comparisons and definite conclusions. With regards to the confines of the research paper, the moderator variables represent publication bias and type of experience. These two factors are responsible for the variations in determining the experience-performance relationship. The meta-analysis highlights the needs for increased standards across literature related to how the experience should be measured when assessing performance. Overall, it is evident that industry experience and management experience increases the probability of heightened performance in a firm.

Main findings

This research paper has uncovered some of the reasons for the variation of results across the current experience-performance literature. The most exciting results obtained from the ordered meta-analysis comes from the moderators that represent the experience measures. This confirms the argument that suggests the difference in an experience measure account for a great deal in the variation of results across the literature. The quality of publication outlets indicated that higher ranked outlets increased the probability of obtaining a positive estimate for the impact of experience on performance. Notably, publication bias may be present in favour of positive results. Therefore, the impact factor increased the probability of obtaining a positive effect by 12 %.  If the results were randomly chosen from a normal distribution, an equal amount of positive and negative results would be expected across the literature.

Under the weighted model, the marginal effects show that industry experience and management experience have a significant impact on the probability of obtaining a positive result. Traditional experience in terms of age, life experience and maturity tend to impact the firm positively. Industry experience was found to increase the likelihood of positive performance by 54% while management experience was likely to improve performance by 40%. Notably, management experience is likely to heighten the performance of the firm that it is relevant to the firm at hand. Entrepreneurs may create firms outside their breath of industry experience.  For example, data collected from the technology industry shows that of the probability of obtaining a negative estimate for the impact of experience on performance. Indeed, many firms tend to struggle in the early years of operation which may not allow for the experience of the entrepreneur to impact firm performance. Thus, when hypothesising about the effect of experience, the relevance of that experience is key to determining the firm’s subsequent performance.