Specialists, Generalists, or Both? Founders’ Multidimensional Breadth of Experience and Entrepreneurial Ventures’ Fundraising at IPO

2023 | Organization Science | Citations: 0

Authors: Souitaris, Vangelis; Peng, Bo; Zerbinati, Stefania; Shepherd, Dean A.

Abstract: Different streams of research have led to contradictory conclusions about the ve ... Expand

Abstract: Different streams of research have led to contradictory conclusions about the venture performance implications of founders’ breadth of experience. Although extant empirical studies have explored the performance implications of founders’ breadth of experience at the start-up stage, we focus on the later stage of the initial public offering (IPO). We theorize that investors categorize venture founders based on two salient dimensions—their industry and functional background—and we relate this categorization to resource acquisition at IPO. To test our model, we use a hand-collected data set of 175 entrepreneurial IPOs in the Alternative Investment Market in London (2002–2013) and two randomized experiments. We theorize and find that compared with entrepreneurial ventures with a lead founder specializing in one industry or one function, investors generally devalue those with a category-spanning lead founder (a generalist). However, devaluation is less severe when a lead founder is a generalist in one dimension (e.g., industry) but a specialist in the other dimension (e.g., function). We also theorize and empirically test trust as a mechanism for the generalist penalty. Specifically, audience members (investors) have low trust in a generalist producer (founder) in contexts where the two parties consider entering into a partnership (equity investment at IPO), and so that generalist producer is devalued. Finally, we show that an external expert endorsement—in our case, from intensive venture capital affiliations—offsets the generalist penalty, especially when category spanning occurs in multiple category dimensions. Funding: This work was supported by the University of St. Gallen and the Natural Science of China [Grant 71832012]. Supplemental Material: The e-companion is available at https://doi.org/10.1287/orsc.2022.1581. Collapse

Topics: marketing management IT career entrepreneurship database system decision making

Methods: experiment theory development robustness check qualitative interview survey

Theories: social identity theory

Growing pains and blessings: Manifestations and implications of equity crowdfunding industry maturation

2022 | Decision Support Systems | Citations: 0

Authors: Lukkarinen, Anna; Shneor, Rotem; Wallenius, Jyrki

Abstract: The equity crowdfunding industry has grown significantly in the past decade. Ind ... Expand

Abstract: The equity crowdfunding industry has grown significantly in the past decade. Industry life cycle theory suggests that growth dynamics and relations between stakeholders change as industries mature. The present study ex­ amines the characteristics and implications of maturation in the equity crowdfunding industry via the lens of industry life cycle theory. Specifically, we explore whether the industry is reverting to traditional entrepreneurial finance practice, or whether it retains its original distinguishing characteristics. Accordingly, we first assess changes with respect to users (investors) and products (campaigns and investment objects). Second, we assess the implications of these changes by comparing the determinants of fundraising campaign success in earlier and later industry stages. We use a longitudinal database and survey data sourced from a long-standing European equity crowdfunding platform. We show that equity crowdfunding seems to be converging towards traditional entre­ preneurial finance practice, yet maintaining certain unique features stemming from digitality, platform nature, and investor diversity. Specifically, we show that (1) fundraising ventures and their campaigns have become larger and more professional, and (2) engaged investors became more knowledgeable and return-oriented. Accordingly, traditional investment criteria, such as team and commercial terms ratings, have become more important predictors of campaign success, and easily observable campaign characteristics, such as B2C business models, and minimum investment thresholds, less so. The findings support platform managers and entrepreneurs as they plan for campaigns seeking to attract investors in the industry's later stages. Collapse

Topics: crowdsourcing crowdfunding data quality database system business model

Methods: survey longitudinal research regression analysis method Levene's test forums posting