Big Data-based Management Decisions and Start-up Performance

With Big Data (BD) becoming widely available, the question emerges of whether Big Data Analytics (BDA) leads to better managerial decision-making and firm performance not only among incumbents, but also for start-ups. Given their liability of newness and resource constraints, adopting this new technology poses significant risks. Based on a large sample of start-ups in Germany, we study the adoption of BDA among young ventures and analyze its economic impact through various performance measures, such as survival rates, costs, sales, employee growth, and access to financing. Our findings show that BDA adoption indeed is a risky strategy with potentially high rewards. Start-ups using BDA have a lower survival rate, which is closely tied to two interrelated factors: higher operating costs despite their already tight financial resource constraints and higher uncertainty in sales. At the same time, the increased risk of adopting BDA is, conditional on survival,
compensated in several ways: Besides increased sales, BDA-adopting ventures show higher employee growth and are more likely to secure Venture Capital (VC) funding. For high-performing BDA-adopting ventures, the positive effects on employee growth are even more pronounced. Given the need for complementary resources, BDA may act as a performance amplifier, yielding higher returns for firms that are better positioned to leverage its potential.

Rodepeter, Elisa, Christoph Gschnaidtner und Hanna Hottenrott (2023), Big Data-based Management Decisions and Start-up Performance, ZEW Discussion Paper Nr. 23-061, Mannheim.