Knowledge that Transforms

Research Summary This paper examines how reward‐based crowdfunding backers respond to risk disclosures. Combining theoretical frameworks from financial accounting with the risk perception literature, we adopt an abductive research approach to explore various nuances that influence backers' tolerance for risk information. In addition to identifying the general dynamics in backers' risk interpretation, we highlight the complexities introduced by differences in the disclosure's semantic content, expressed feelings, and the discloser's background attributes. Relying on a hierarchical Bayesian mixture model, we first identify a positive curvilinear relationship between risk information quantity and crowdfunding success. We then demonstrate the influences of what is disclosed, how it is disclosed, and who discloses it, while emphasizing the context‐bound specificities of individual project types. Managerial Summary Our study aids entrepreneurs to effectively communicate risks in reward‐based crowdfunding campaigns. We consistently find that entrepreneurs provided substantially less risk information than the optimum amount of information, emphasizing the need for more extensive disclosures. On what to disclose, backers favored information on risks that are consequential to them personally and not those that affect the entrepreneur's project. On how to disclose, expressed feelings had little influence on how much risk information backers preferred. However, who provides the disclosure was crucial, as trust‐enhancing factors increased backers' appetite for risk information. Together, our findings show that, while communicating risks, entrepreneurs should be cognizant that online backers undertake calculative evaluations and have material motivations. Furthermore, our category level results aid entrepreneurs in making practical judgments on context‐specific deviations across project types.

Research Summary Chief executive officer (CEO) entrepreneurial orientation (EO) is an emerging topic within entrepreneurship research. This research offers the attention‐based view (ABV), and its principles of attentional focus, situated attention, and structural distribution of attention to explain how CEO EO fosters an innovative organizational workforce. We theorize that CEO EO predicts lower‐level employee innovative behavior when their top managerial attentional focus on entrepreneurship is translated into high‐performance work practices, which structurally distribute their strategic attention throughout the organization and promotes a situated attentional condition for employees emphasizing innovation. Moreover, we consider (a) human‐resource management (HRM) perceived importance and (b) departmental functional foci as boundary conditions. Using a multi‐level and multi‐source sample from 152 Chinese firms, results support our arguments. Managerial Summary Employee innovative behavior is critical to firm growth, renewal, and sustainability. By collecting and analyzing data on 2745 employees nested in 586 departments nested in 152 organizations, we examine the critical role that human resource management (HRM) systems and high‐performance work practices may play in translating a CEOs emphasis on entrepreneurial activity into employee innovative behavior. We offer and observe support for an attention‐based perspective that HRM systems serve as “attentional structures” which channel CEO preferences to lower‐organizational levels. Our results further indicate that an embrace of HRM as a strategic priority among top managers, as well as whether employees are in “boundary spanning” input–output areas of the business, to be meaningful factors which strengthen the effect of HRM‐based attentional structures upon employee innovative behavior.

Research Summary This study employs resilience theory and examines the dynamics of business modeling in international firms that enable them to resist environmental shocks under the adverse conditions of a global pandemic. Our multiple‐case study shows that firms develop various dynamic states of their business models (BMs) during the resilience process; each state differs in terms of the scope of BM change and the concurrent degree of BM innovativeness. Shifts in dynamic states result from attaining certain resilience capabilities. We contribute to the dynamic view on BMs, and the process perspective on organizational resilience; we also advance BM research in the context of internationalization. Managerial Summary Under conditions of extreme disruptions that take the form of long‐lasting adversity, international firms need to continuously adjust their BMs to brave force majeure and remain resilient. This study takes a dynamic perspective on business modeling and examines how international firms develop different dynamic states of their BMs to stay resilient under extreme uncertainty; each state differs in terms of the scope of BM change, concurrent degree of BM innovativeness and the attained resilience capabilities. We show that business modeling is a continuous task of international firms that allows them not only to resist adversity but also to open new markets.

Research Summary The question of why and how strategic leaders differ in the ecosystems they envision is central to firms' digital transformation. We unpack the cognitive microfoundations of how strategic leaders form their ecosystem vision —a mental model of a firm's multilateral complementarities with its partners to realize a value proposition. Our motivated interactional lens emphasizes the role of strategic leaders' cognitive motivation for shaping four interaction types with (prospective) partners: participatory, selective, collaborative, and reclusive. We theorize how these interactions shape the changes strategic leaders make in their mental models, and thus, to envision different levels and types of complementarities with (prospective) partners in the digital transformation. Our theory illuminates the roles of strategic leaders, their cognitive motivations, and social interactions in firms' ecosystem leadership. Managerial Summary Digital transformation is an ecosystem challenge for incumbent firms. As part of their ecosystem leadership, strategic leaders need to form a vision of how to complement their value offerings with (prospective) partners' offerings. This vision, in turn, can affect the types of ecosystems they enact. We develop a theoretical model that emphasizes the role of strategic leaders' cognitive motivation for the interactions they engage in with (prospective) partners and for the types of ecosystem visions they form as a result.

Research Summary This article investigates venture capital (VC) decision‐making, a process that occurs under changing conditions and limited, ambiguous information. We shed new light on the inherent dynamics of this strategic process. One of the key distinguishing features of our study is its unprecedented access to the internal decision‐making process of a VC firm. By analyzing unique, longitudinal data capturing 2,383 proposal selection processes conducted over the life of one venture capital fund, we show how decision‐making speed and the information cues that decision makers rely upon will, over time, change in systematic and predictable ways. Specifically, our approach allows us to identify fundamental, unexplored patterns with respect to the selection process as a whole and the multiple stages within the process. Managerial Summary Each year venture capitalists receive hundreds of investment proposals, but is every proposal received by a venture capitalist processed equally? In this study, we show how the source of a proposal and the available amount of investment capital, factors that are not contained within the pages of a proposal, may influence the investment decision‐making process. Our results highlight the impact of being referred to a venture capitalist by a trusted source, as more time is spent evaluating these proposals and they proceed further along in the process. We also find that venture capitalists process proposals more quickly as the capital in the fund is invested over the life of the fund.

Research Summary Entrepreneurship researchers commonly use survey‐based research designs. However, surveying entrepreneurs poses unique challenges. A principal concern for survey‐based research is nonresponse bias, which occurs when survey respondents systematically differ from those who were sampled but did not participate in the study. To address this concern, we conducted a systematic review of the literature to determine what practices are currently being used to address nonresponse bias (142 articles, 180 surveying efforts) and conducted multiple studies to determine the extent to which nonresponse bias can affect statistical results. Based on these efforts, we present a series of techniques and a checklist that entrepreneurship scholars and reviewers and editors can consider to mitigate the risk of nonresponse bias prior to, and following, their data collection efforts. Managerial Summary In an average survey of entrepreneurs, approximately 40% of the people contacted will respond. This raises an important question: Can we make conclusions about the entrepreneurs who did not respond? Answering this question requires one to consider nonresponse bias (i.e., if respondents differ from nonrespondents). We conducted a systematic review of survey‐based studies in entrepreneurship and conducted three field studies. Our results show that nonresponse bias can manifest in different ways across studies, but it is rarely discussed in the literature. We also show that response rates are poor proxies of nonresponse bias. Based on these efforts, we present several techniques for scholars, reviewers, and editors to consider in the hopes of mitigating the risk of nonresponse bias in their studies.

Research Summary We study how environmental enablers, specifically disruptive ecological shifts, and subsequent regulatory activity, led to the formation of a local ecopreneur ecosystem in Kenya and how this process was facilitated by the brokerage role of an international NGO. Drawing from the entrepreneurial ecosystem literature, and using a strategic network perspective to conceptually map salient interorganizational ties, multilevel engagement, and resource generation, we utilize qualitative grounded theory analysis to argue that environmental changes have catalyzed the regulatory change towards the formation of an entrepreneurial ecosystem for low‐resourced ecopreneurs. This process is facilitated through ecosystem brokering through an anchor tenant that accelerates knowledge, resources, and viable exchanges to advance venture sustainability. Managerial Summary Our study unpacks how regulatory responses to environmental shifts enable the systemic development of venture creation. We explore how environmental changes, first in the natural environment, and subsequently, the regulatory environment—influence ecosystem emergence for entrepreneurial activity. We present three dimensions of regulatory enablement that shift conditions to favor venture building. Problem framing by the regulatory sector signals potential opportunities for entrepreneurs for value creation. Prioritization of this problem, emphasized in the government's regulation, sets new agendas and implies that new rules and resources would be allocated towards such opportunities. New rules also reconfigure boundaries to invite new actors and interactions into the discourse on environmental preservation in Kenya.

Research Summary Although entrepreneurship training programs are designed to help necessity entrepreneurs acquire skills and capabilities to take entrepreneurial action, participants in these programs often fail to do so. In partnership with a local government agency, we conducted a randomized field experiment involving 165 entrepreneurs in rural Tanzania where in addition to providing technical‐skills training, approximately half of the participants also received “growth mindset” psychological training. Those who received the growth mindset training displayed more entrepreneurial action in their business than those in the control group. Importantly, higher levels of entrepreneurial self‐efficacy mediated the positive impact on entrepreneurial action displayed by participants who received the growth mindset training. We discuss how complementing traditional technical‐based training with growth mindset training can improve the efficacy of entrepreneurship training programs. Managerial Summary Entrepreneurship training programs often fall short in translating knowledge into action. To address this issue, we conducted an experiment with 165 entrepreneurs in rural Tanzania. All participants received technical‐skills training, but half were also exposed to “growth mindset” training. Those who received the growth mindset training displayed greater initiative in business growth. The newfound confidence and grit they gained empowered them to apply learned principles effectively, ultimately enhancing the effectiveness of entrepreneurship training programs.

Research Summary Although pre‐entry startup experience is widely recognized as a driver of innovation in new ventures, a core feature of new venture teams is that their membership is fluid. In this article, we theorize and test whether venture team membership fluidity incrementally explains new venture innovation. We also investigate and demonstrate that team fluidity conditions the impact of pre‐entry startup experience present at founding. Testing our hypotheses with a cohort of 440 new ventures tracked for 8 years, we find support for the model across a wide range of specifications. Our study advances current understanding of the relationship between pre‐entry experience and new venture innovation, as well as novel insights into the central but often overlooked role of team fluidity. Managerial Summary New ventures rely on innovations to establish a market presence and compete against established firms. Even though team members are an essential source of inspiration, ideas, and resources to foster innovation, teams often change substantially as the venture evolves. We ask the question—does modifying the make‐up of the team make it more likely that the venture can innovate? We contend that such change significantly shapes the cognitive and interpersonal processes by which team members contribute to innovations. Our results suggest that new ventures undergoing member change can boost innovation in three ways: adding new members to the team with relevant experiences, taking advantage of opportunities to pause and reflect upon team processes in the wake of change, and mitigating the disruptive effects of change.

Research Summary This article studies fintech targeted to the base of the pyramid and its role in encouraging savings for microenterprises. We argue that the impact of fintech adoption on savings for microenterprises by the poor and by women is moderated by their access to banks—specifically, that fintech is more impactful with bank accounts, and this complementarity between fintech and banks is amplified for poor women. We develop hypotheses in the context of mobile money, a popular fintech across the developing world. Our arguments are supported by a sample of 81,345 individuals across 74 low‐ and middle‐income countries. Overall, the paper suggests that, although fintech can be a promising tool for the poor, it is equally important to improve inclusivity in formal banking institutions. Managerial Summary We offer an alternative to the popular narrative that fintech replaces the need for formal banks. In an analysis of 74 low‐ and middle‐income countries, we find that fintech is more useful in encouraging marginalized individuals to save for microenterprises when it is complemented by banks. Our finding of complementarity between fintech and banks, especially for poor women, suggests the need to rethink the notion that fintech is a substitute for banks. We suggest caution in drawing definitive conclusions about the unconditional positive impact of fintech. We recommend that policymakers continue driving financial inclusion with formal banking. Strategic entrepreneurs seeking to tackle grand societal challenges can utilize digital technology to capitalize on the strengths of established institutions.