Knowledge that Transforms

Research Summary Gender differences in peer review and the associated impact on innovation financing are well documented but less well understood. We study peer review in the National Aeronautics and Space Administration Small Business Innovation Research program, a public initiative seeking to increase women's access to innovation funds. We theorize that reviewers use status characteristics inappropriately as heuristics and create gender bias. Econometric analysis shows evidence of direct bias against female applicants, an effect linked to challenges for newcomers in demonstrating individual legitimacy rather than concerns about the organizational legitimacy of the associated firm. We also demonstrate a corrective redistribution to reverse this bias and create equity in the funding outcome. As these results negatively impact diversity in innovation, we propose policy recommendations to overcome this bias. Managerial Summary Peer review is an important mechanism to rank and select technical proposals for funding. We examine the role of gender in a government program conducting this process. Controlling for the proposal quality and other factors, we show that the gender of the proposer is linked to lower scores. This effect is associated with proposals from females who are new to the program, suggesting their challenges in demonstrating credibility as leaders of these projects, and exacerbated by the fact that women represent a disproportionately high share of newcomers. Subsequently, the program reverses this bias such that the funding outcomes do not show the same inequities. This has important implications for policies supporting gender diversity in innovation.

Research Summary Our study generalizes and extends a cumulative body of research on diversification into the contexts of social entrepreneurship. We examine the extent to which internationalization and program diversification affect a coveted, yet understudied, outcome for social organizations—revenue diversification—and investigate efficiency as a boundary condition of those relationships. Our longitudinal analyses, based on roughly 53,000 observations of Canadian nonprofits that engage in social entrepreneurship, indicate that program diversification is positively related to nonprofits' revenue diversification, but internationalization is not. Further, we found that efficiency compliments these relationships. Our findings are partially in line with research from the for‐profit literature, but also extend this line of research by suggesting that different types of diversification are associated with revenue diversification in the context of social entrepreneurship. Managerial Summary Founders, executives, and managers of social organizations often strategically design and implement programs and internationalization strategies to achieve better organizational outcomes. Our results reveal that pursuing program diversification opportunities are related to revenue diversification and that highly efficient nonprofits are more likely to increase their revenue diversification as they pursue more program diversification and internationalization opportunities. Social entrepreneurs and their organizations may therefore learn from, build upon, and to some degree tailor theories and strategies of for‐profit organizations to better serve their social and environmental mission and ensure long‐term financial stability.

Research Summary Digital equity crowdfunding platforms have brought an unprecedented number of international investment opportunities to investors' reach. Although most equity crowdfunding investments are still made domestically, cross‐border investments often have a decisive role in a campaign's success. We therefore ask what drives cross‐border investments and theorize how international investors’ attention directs their investment choices. We leverage unique data and several complementary approaches to examine this question. Our contribution to the equity crowdfunding literature is twofold: (a) we theorize and empirically show how international investor attention affects cross‐border equity crowdfunding investments, and (b) we conduct the first empirical study of the drivers of cross‐border investments in equity crowdfunding. These findings also have implications for new venture internationalization research and the broader literature on investor attention. Managerial Summary Although most equity crowdfunding investments are still made domestically, cross‐border investing is growing, and cross‐border investments are often critical for campaign success. We show that to attract cross‐border investments, it is important for platforms and fundraising companies to capture foreign investors' attention. Platforms and companies can support this through measures such as international digital marketing. In addition, we found that cross‐border investors are more likely to invest in companies with investors' nationalities represented in the team. Companies can thus benefit from nurturing international diversity and marketing in their team members' countries of nationality. Also, companies can seek investments even from distant countries because once investors invest abroad, distance—be it geographic, institutional, cultural, or linguistic—no longer plays a major role in their investment decisions.

Research Summary Building on upper echelons theory and implicit leadership theory, we examine if the personal attributes of CEOs of firms undertaking an initial public offering influence the pricing decisions of investment bankers. We argue that charisma and humility in CEOs alter two of the most important decisions of investment bankers: determining the firm's offer price range and setting the firm's actual offer price. Specifically, we argue that the perceptions and negotiation abilities of more charismatic CEOs result in higher offer prices and smaller offer price ranges for their firms. We also argue that the perceptions and negotiation abilities of more humble CEOs result in lower offer prices and broader offer price ranges for their firms. Managerial Summary We investigate how charisma and humility in CEOs of firms undertaking an initial public offering influence two of the most important decisions of investment bankers: determining the firm's offer price range and setting the firm's actual offer price. We show that firms led by more charismatic CEOs enjoy higher offer prices and smaller offer price ranges due to their perceptions of being an effective leader and their strong negotiation abilities. We also show that firms led by more humble CEOs have lower offer prices and broader offer price ranges since humble leaders fall outside of expected perceptions of effective leaders and lack strong negotiation abilities. Ultimately, our study demonstrates the importance of CEO characteristics on pricing decisions throughout the initial public offering process.

Research Summary This paper develops a theoretical explanation for why economic inequality may affect individuals' decision to engage in entrepreneurial activities. We argue that inequality may have a positive impact on entrepreneurship because it triggers social comparison, thus motivating individuals to become entrepreneurs. Moreover, such effect is stronger for people in the middle economic status group than for those in the top or bottom groups, as middle economic status group has both the motivation and capability to take entrepreneurial actions. We use a sample of 3,879 Chinese households from 2010 to 2018 and merge them with county‐level variables to test our hypotheses. The results support our hypotheses and remain consistent across different model specifications, including models controlling for the potential endogeneity between inequality and entrepreneurship. Managerial Summary The rising economic inequality around the world has drawn widespread attention. Although inequality may not be desired, the optimistic takeaway from this paper is that inequality might also have a positive side by motivating entrepreneurial activities, especially for people from the middle economic class. While exerting continuous efforts to reduce poverty, governments could also properly treat the entrepreneurial spirit inspired by inequality and guide it to encourage entrepreneurship. From a dynamic point of view, emerging economies, when progressing toward a more liberal and market‐oriented economy, might go through a period of time with increasing inequality. Thus different countries, due to their unique social and economic backgrounds, may not share one pareto optimal inequality ratio.

Research Summary We investigate the relationship between outside board members (OBMs) and short‐ versus long‐term strategic orientation of new ventures in the startup phase. Owing to their smallness and newness, a short‐term orientation may be more desirable. Using a dataset of 170 Belgian new ventures in the startup phase, we find a positive association between the proportion of OBMs and a short‐ rather than long‐term strategic orientation, attributed by our interviewees to concern for firm survival. This association is stronger in new ventures operating in highly competitive environments, and where the founding team performed few pre‐startup activities. Greater focus on the short‐term may be beneficial in the long run, as a positive association is found between a high relative short‐term orientation and ventures' growth. Managerial Summary New ventures in the startup phase should primarily focus on short‐term issues: get a better understanding of who are the customers and try to validate the business model. This article reveals that the board of directors plays a pivotal role in influencing the extent to which startups have a short‐term strategic orientation. Specifically, it explains how OBMs provide advice, monitor the startup's progress, and guide entrepreneurs on key short‐term priorities. This strategic role of OBMs is more pronounced in new ventures where the entrepreneurial team is less prepared at founding and in firms operating in highly competitive environments. Importantly, our paper provides evidence that a short‐term orientation in the startup phase does not jeopardize future venture growth in the scale‐up phase.

Research Summary In this study, we advance novel understandings of strategies that marginalized entrepreneurs use to overcome institutional bias and mobilize crucial resources. Using grounded theory, we analyzed qualitative interview data from 97 women entrepreneurs across Iran, India, and the United States to understand the source and nature of the institutional constraints they faced, the strategies they used to overcome these constraints, and the agency and legitimacy that ensued as a result. We found that marginalized entrepreneurs engaged in three focal strategies: family transmutation, ally activation, and enabler cooptation. We propose that these strategies enhance marginalized entrepreneurs' likelihood of securing needed resources, but with different consequences for their agency and legitimacy. We offer several contributions to entrepreneurial resource mobilization and institutional literatures. Managerial Summary This study explores how marginalized entrepreneurs gain agency, legitimacy, and other resources in the face of institutional biases. Our findings from interviews with 97 women entrepreneurs in Iran, India, and the United States show that when marginalized entrepreneurs face biases from their families, they can use a family transmutation strategy to gain family support and enhance their agency and legitimacy. Furthermore, marginalized entrepreneurs who encounter constraints from non‐family members can use an ally activation strategy to alleviate these constraints and enhance their agency and legitimacy. Finally, we found that in the face of self‐constraints that marginalized entrepreneurs impose on themselves, the use of an enabler cooptation strategy may have an adverse effect on their agency and legitimacy, even though it may facilitate their temporary resource access.

Research Summary Entrepreneurial judgment remains a concept that resembles a black box. This article attempts to further open that black box by developing a dimensionalization of types of judgment. To achieve this, it joins recent efforts to explicitly link entrepreneurship to Simonian themes by integrating the notion of decision problem structures into the judgment‐based approach (JBA) to entrepreneurship. This article proposes a more comprehensive and nuanced approach to judgment in the face of decision problems we label “real‐structured.” Extending the JBA comes with several important implications: It uncovers additional entrepreneurial knowledge problems, provides new insights for both economic organization and judgment communicability, and informs research on entrepreneurial success and failure. It also sheds new light on the controversy over the relationship between effectuation and judgment. Managerial Summary When taking decisions, entrepreneurs cannot know how the future will pan out. Those decisions are made under conditions of uncertainty and only time will tell whether they prove astute or otherwise. The uncertainty of the future leads entrepreneurs to exercise judgment based on their individual beliefs and to act accordingly. The components of that entrepreneurial judgment remain rather underexplored. The purpose of this article is to dig deeper into, and thereby improve, the understanding of entrepreneurial judgment. The main result of this article is a four‐part dimensionalization of judgment, covering entrepreneurial (sub‐)judgments on the effects incurred by action, the appraisal of action alternatives, the goals underlying action, and resolving the decision problem.

Research Summary Using a sample of 205,792 individuals in 70 countries with 39 languages, this paper presents novel empirical evidence for how a language's future time reference , defined as the requirement that speakers mark time in the future, affects a speaker's likelihood of engaging in social entrepreneurship. FTR subtly shapes a speaker's temporal orientation, such that speaking a futured language (i.e., strong FTR) favors a short‐term orientation which positively affects the likelihood of being a social entrepreneur. Furthermore, institutional uncertainty arising from weakly entrenched institutions moderates this relationship. Individuals who speak futured languages in contexts characterized by regulatory institutional uncertainty (weak rule of law, weak property rights, and strong corruption) are more likely to engage in social entrepreneurship. Theoretical and practical implications and future research directions are discussed. Managerial Summary This paper examines the influence of language and regulatory institutions on an individual's decision to engage in social entrepreneurship. We show that entrepreneurial strategies towards social value creation are more likely to be pursued in countries where language is characterized as futured (i.e., using sentences with “will/shall + infinitive”) with the linguistic feature of future time reference (FTR). Moreover, the positive impact FTR has on the strategic decision to become a social entrepreneur intensifies when there is regulatory institutional uncertainty. That is, the probability an individual is a social entrepreneur increases when there is weak rule of law, weak property rights, and strong corruption within a country. In sum, our study highlights the important interplay between language, an overlooked cognitive institution, and regulatory institutions in shaping entrepreneurial behaviors and social outcomes.

Research Summary Critical scholars recognize a disjuncture between the problems identified by social entrepreneurs and the solutions they propose. Existing theory treats this as a problem to be rectified at the organizational level. In this essay, we widen attention to the macro‐oriented systems change strategies of social entrepreneurs. We develop a dynamic typology showing how strategies are reassembled over time to stimulate or deflect desire for systems change. Deriving inspiration from Goffman, we theorize the ways that different types of systems change actor perform systems change via interaction with their environments. Drawing on illustrative cases on the boundaries of social entrepreneurship, we show how the collective action frameworks developed by systems change actors can be adapted and repurposed by their (systems) audiences: effectively turning rebellion into money. Managerial Summary Social entrepreneurs often call for systems change to tackle wicked problems such as poverty or climate change. However, the strategies they propose for tackling these problems, such as lending money to poor people are considerably less radical. In this essay, we identify three types of systems change actor distinguished by the degree of systems change they call for. We trace their ideas over time to illustrate how strategies are mediated, and subsequently repurposed through interaction with the systems they seek to change. In conclusion, we call upon researchers and social entrepreneurs to widen their perspectives to incorporate more radical ideas and potentials for systems change, and for greater attention to be devoted to scrutinizing and protecting the integrity of systems change strategies.