We use signaling theory to explain how new ventures effectively signal future prospects to acquire external resources. Based on a sample of 235 new ventures drawn from a unique dataset combining ...multiple sources, we examine the signals of founders' human capital (i.e., education, industry experience, and founding experience) and investor prominence and their influence on the amount of external funding received across two stages of venture funding. We find that founders' founding experience and education have the greatest effects for acquiring first-round financing, but in later stages, only the signaling effect from education remains. Furthermore, we find important interactions between founders' human capital and investor prominence in the second round of funding. By utilizing lagged funding information, we show that different types of signals have a dynamic and temporal impact on new ventures' resource acquisition, including the persistence of some signals and the temporariness of others.
•Examine the roles of signals from founders human capital and prominent investors in new venture investment•Develop multi-stage model where signaling factors predicting first stage of funding are different from those in second stage•Find that the impact of the signal from human capital changes across rounds of funding•Show a more dynamic and temporal view of signaling across levels of new venture development•Find interaction effects of different types of signals when multiple signals co-exist.
The development of firm growth research has been notably slow. In this paper, we argue that a major reason for this lack of development is the impatience of researchers to prematurely address the ...question of “how much?” before adequately providing answers to the question “how?” On the basis of an extensive review of the literature, we suggest how growth research can advance by changing focus to growth mode (organic, acquisition, hybrid). Toward this end, we provide a research agenda that helps establish the types of questions that growth researchers can ask within this new focus.
While 30 years of entrepreneurial orientation (EO) research has demonstrated that EO provides critical insights into questions of organizational–level strategy and performance, how EO manifests ...inside organizations has received little attention. Instead of assuming that EO is homogenous, we examine the questions of how and why EO might pervade organizations heterogeneously along three dimensions: vertically across hierarchy levels, horizontally across business units, and temporally as an organization develops. We then present three models for how EO can dynamically pervade organizations and discuss how examining the pervasiveness of EO can further our understanding of entrepreneurship as an organizational phenomenon.
Uncertainty is central to entrepreneurship; however robust and generalizable findings that explain the conditions in which uncertainty may impede or promote entrepreneurial action remain elusive. We ...operationalize uncertainty as a multi-dimensional construct composed of state, effect, and response types of uncertainty (Milliken, 1987) to investigate the relationship between uncertainty and entrepreneurial action. We decompose more than 2800 exploitation decision policies nested within a sample of new product decision-makers working in entrepreneurial software firms. We focus on the primary decision-maker's willingness to exploit a given opportunity in the face of varying combinations and manifestations of uncertainty and find that the type of uncertainty experienced influences the willingness to engage in entrepreneurial action differently. Further, we find that differences in how each type of uncertainty is manifested in the environment, the scale of exploitation (i.e. large vs. small), and the entrepreneur's expertise serve to moderate the relationship between uncertainty and action in counter-intuitive ways. We discuss the implications for both theory and practice.
The performance of new firms is important for economic development but research has produced limited knowledge about the key relationships among growth, profitability, and survival for new firms. ...Based on evolutionary theory, we develop a model about how new firms resolve uncertainty about their ability to prosper in a market by monitoring changes in profitability. Our model predicts selection pressures to weed out underperforming firms and learning in order to allow survivors to improve performance and grow. We test our theory using a unique panel of knowledge-intensive new firms in Sweden. We find strong support for the notion that profitability enhances both survival and growth, and growth helps profitability but has a negative effect on survival. Implications are discussed.
► We model the complex set of relationships among growth, profitability, and survival in new firms based on evolutionary thinking. ► Advanced methodological tools and population of new firms allow us to overcome many common weaknesses in growth research. ► Find important and unexpected direct relationships among key variables. ► Results have implications for the importance of growth and profitability for industry evolution and economic development.
We explore new ventures’ capital structures, providing novel theoretical reasoning concerning path dependence. We examine a longitudinal sample of 1,756 Swedish startups and their use of external ...financing. We find support for path dependence in new ventures’ financial structures in that their early funding choices of subsidies, debt or equity, persist over time, with the strongest path effect for equity. In line with theory, those ventures who replace their CEO are more likely to change capital structures. Our study adds to the stream of research providing alternative explanations to prevailing theories of the evolution of new ventures’ financing structures.
We develop and validate measures of causation and effectuation approaches to new venture creation and test our measures with two samples of entrepreneurs in young firms. Our measure of causation is a ...well-defined and coherent uni-dimensional construct. We propose that effectuation is a formative, multidimensional construct with three associated sub-dimensions (experimentation, affordable loss, and flexibility) and one dimension shared with the causation construct (pre-commitments). As specified by Sarasvathy (2001), we also show that causation is negatively associated with uncertainty, while experimentation, a sub-dimension of effectuation, is positively correlated with uncertainty. The major contribution is the resulting validated scales that measure causation and effectuation.
Previous research has mainly focused on the cognitive-based theory of planned behavior (TPB) model to predict entrepreneurial intentions. However, given the close relationship between cognition and ...emotion, researchers may need to pay more attention to how emotional reactions help predict entrepreneurial intentions. To fill this gap, we apply both cognitive (i.e., descriptive norms) and emotional (i.e., anticipated inaction regret) aspects to understand predictors of entrepreneurial intentions. Specifically, we employ the affect-as-information perspective as a complementary theoretical lens to TPB to test whether the role of descriptive norms on entrepreneurial intentions is affected by anticipated inaction regret as a form of emotional reaction to descriptive social norms. We conducted two survey-based studies with diverse samples (i.e., online Mturk panels of adults in the US and undergraduate students in Korea). This study demonstrates (1) a positive and significant relationship between descriptive norms and entrepreneurial intentions and (2) a mediating role of anticipated inaction regret between descriptive norms and entrepreneurial intentions. Our results contribute to the entrepreneurial intentions literature by exploring the mechanism between cognition and emotion, and highlighting an indirect emotional link (i.e., anticipated inaction regret) in understanding entrepreneurial intentions.
Research into entrepreneurial failure is increasing in prevalence. However, there remains a lack of clarity surrounding how failure is conceptualized. This is an important issue because how failure ...is conceptualized influences the relevance of research questions posed and the comparability of findings across studies. In this article, we review conceptualizations of entrepreneurial failure including at two levels of analysis (firm and individual) and perspectives of failure (objective and subjective). We discuss the implications these conceptualizations have for future research, including the sampling frame and questions scholars ask.
Scholars’ knowledge of the factors behind high-growth firms remains fragmented. This paper provides a systematic review of the empirical literature concerning high-growth firms with a focus on the ...strategic aspects contributing to growth. Based on our review of 39 articles, we identify five drivers of high growth: human capital, strategy, human resource management, innovation, and capabilities. These drivers are combined to develop a conceptual model of high-growth firms that includes potential contingency factors among the five drivers. We also propose a research agenda to deepen the study of high-growth firms in strategic management.
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