Knowledge that Transforms

Research Summary Unicorns—private new venture firms with over a billion dollars in valuation—have garnered increased attention from the media, analysts, and the public. We first provide a descriptive assessment of unicorn ventures by examining heterogeneity within this unique population using a novel dataset. Then drawing on prior research on growth and valuation, we focus on the temporal dynamics of ventures within the unicorn population to assess variations in the speed at which they reach a billion dollars in valuation. We highlight some significant relationships by investigating associations between founder, investment, venture, and industry characteristics and the temporal dynamics of speed to reach unicorn status. We conclude by outlining a research agenda on the temporal dynamics of growth and scaling. Managerial Summary Unicorn ventures represent a small but high‐profile category of entrepreneurial ventures that have captured media attention and garnered broad interest while attracting significant private capital. As a global phenomenon, they have certainly left a significant mark on the business landscape as they exploit unique market and technological opportunities to exemplify new industries and market categories. Leveraging hand‐collected data from many sources, we provide a comprehensive descriptive assessment of this population by focusing on the founder, venture, investment, and industry characteristics. We also show how U.S.‐ and China‐based unicorn ventures differ on numerous factors. Given a great deal of interest in the speed to unicorn status within the practitioner community, we highlight some novel internal (founder and venture characteristics) and external (industry and investment) factors associated with the time it takes to attain unicorn status.

Research Summary Entrepreneurship and innovation are social and relational processes that occur in diverse contexts involving multiple stakeholders. Recently, research in entrepreneurship has begun to explore entrepreneurial processes through the lens of gender. However, unlike its entrepreneurship counterpart, innovation research has paid limited attention to gender dynamics. Indeed, the majority of studies on innovation focus on products, processes or organizations, with the individual often not ‘seen’. This special issue recognizes the intertwined nature of gender, innovation, and entrepreneurship, and in doing so, presents five articles that develop new theory and provide new empirical evidence on the topic of innovation in women’s entrepreneurship. Collectively, they offer new perspectives and open new avenues for future work. In structuring this editorial, we present an overview of the state of the field, provide a multilevel future research agenda, and introduce the articles that comprise this special issue. Managerial Summary Despite the importance of entrepreneurship and innovation for economies and societies worldwide, innovation and gender are rarely explored together. Indeed, limited attention has been placed on the gendered nature of the relations among innovators, entrepreneurs, and processes. This special issue includes five articles which address this gap from multiple perspectives. The editorial describes the state of the field prior to the special issue, introduces the special issue articles, and identifies a multilevel perspective suggesting avenues for further investigation.

Research Summary Our study provides novel insights into how women influence SME innovation in emerging markets, despite the resource‐constrained and gender‐restrictive contexts in which they are embedded. Building from transactive memory (TM) theory and using data from 741 SMEs in 33 emerging markets, we develop and test a contextualized framework of SME innovation that considers gendered effects in ownership, workforce composition, and communication. Findings indicate that in emerging markets, female‐led SMEs employ more women than male‐led SMEs, and more women in SMEs (even at modest levels) enhance and enable the TM system to deliver more innovation outcomes. Findings also suggest that emerging‐market SMEs can be innovative through differing configurations of women in ownership and workforce composition, underscoring the importance of gendered and contextual considerations in innovation research. Managerial Summary Innovation is vital to the social progress and economic development of emerging markets. Even though institutionalized gender bias in emerging markets tends to constrain (rather than empower) women's entrepreneurial activities, our study reveals how women can be an important source of innovation. We find that women in emerging markets are stronger together: women in ownership advocate for and support other women by employing them in their SMEs, and in turn, as women's representation increases in SMEs, women are empowered to collectively share and leverage their endowed resources for innovation. Thus, our study challenges the general perception that men are more innovative than women by revealing that the presence of women in emerging‐market SMEs yields greater innovation outcomes.

Research Summary While family small and medium enterprises (SMEs) increasingly involve women in their boards, the role of female directors as catalysts of innovation is yet to be fully understood. Drawing on upper echelons theory, we examine directors' gender in conjunction with family affiliation to investigate the influence of family female directors on family SMEs' innovation. Moreover, by analyzing the contingent role of socioemotional wealth preferences, we open the black box of noneconomic aspects shaping the cognition and behavior of boards. Our analysis of a unique survey‐based sample of 287 Belgian family SMEs reveals that family female directors do exert a positive influence on R&D intensity. However, according to the mixed gamble logic, this influence is filtered by the positive and negative moderation of their socioemotional wealth preferences. Managerial Summary We examine the role that women who are members of the family owning a business play in the decision making of SMEs. Specifically, we investigate the influence that the involvement of family female directors in the board of family SMEs exerts on innovation decisions. To empirically address this line of inquiry, we conducted a survey on 287 Belgian family SMEs. Our analysis shows that the involvement of family female directors in the board fosters family SME's innovation investments. Yet, such an influence is weakened by the intention of the family to retain control over the business but is enhanced by the identification of family members with the firm and by the desire to renew family bonds through dynastic succession. Therefore, our study cautions family SMEs' owners and managers to pay attention to these important dimensions of diversity when appointing directors to their board.

Research Summary This article examines previously neglected tensions between causation and effectuation in the process of new venture creation. We studied 41 episodes of new venture creation by entrepreneurs in Finland and Denmark, who we followed applying the diary method. We reveal tense relations between the respective causation and effectuation principles at multiple levels, and identify the corresponding mechanisms for their resolution, which, in turn, lead to the synergy. This study enriches the effectuation research by offering a dynamic perspective on causation‐effectuation interplay and categorizing three modes of their interaction, that is, separation, hybrid synergy, and tensions. Managerial Summary Venture creation is a complex process that involves different decision‐making logics. While combining the goal‐driven logic of causation and non‐goal driven logic of effectuation is essential for the success of a start‐up, the road to their synergy can be paved with different tensions. Our study of 41 episodes of new venture creation by entrepreneurs in Finland and Denmark shows that these tensions can occur at the individual, organizational and inter‐organizational levels. We also show four different mechanisms of how entrepreneurs can overcome these tensions within their ventures and in relations with other stakeholders.

Research Summary Inevitable disclosure doctrine (IDD) refers to a legal doctrine where an employer can claim, without the need for proof or evidence, misappropriation of trade secrets to seek an injunction against an employee. Based on entrepreneurial spawning literature, for employees seeking to start their ventures, IDD rejection by state courts could therefore be a potential catalyst to entrepreneurial activity. In a sample of neighbor‐counties across state borders with and without IDD rejection, the two‐way fixed‐effects difference‐in‐differences estimates show positive effects for county‐level entrepreneurial outcomes. However, when applying more recently developed methods for testing staggered implementation, we find no support for county‐level entrepreneurial outcomes across multiple specifications and heterogeneities. The findings have implications for the limited efficacy of IDD rejection on regional entrepreneurial activity. Managerial Summary The value of protecting trade secrets is important for employers, and the role of laws in preventing employees from potentially disclosing their trade secrets is widely studied. One such legal doctrine is the inevitable disclosure doctrine (IDD) where an employer can claim, without the need for proof or evidence, misappropriation of trade secrets to seek an injunction against an employee. We find that IDD rejections by courts have a limited effect on the formation of startups in a county. The findings imply that investors are less encumbered by IDD rejections by courts and that policymakers may not find IDD rejections as a useful mechanism to prime local entrepreneurship.

Research Summary Although reward‐based crowdfunding is lauded for its promise to democratize funding for innovation, claiming innovation in campaign texts has an ambiguous link to crowdfunding performance. We draw from Expectancy Violations Theory (EVT) and, in a field study of 2,185 Kickstarter campaigns, find that innovation claims yield better fundraising performance for women than men, particularly in male‐stereotyped categories. An experiment did not identify the expected indirect effects of innovation claims on crowdfunding performance through ability trustworthiness. However, it revealed that women are perceived as more able when launching campaigns in male‐stereotyped categories, suggesting that EVT and ability perceptions may still play an important but unhypothesized role. We extend research on the role of gender in crowdfunding and strategic entrepreneurship and make several suggestions for future research. Managerial Summary The value of making innovation claims in reward‐based crowdfunding is ambiguous, creating an unclear picture of how entrepreneurs should present new products on these platforms. In a field study of 2,185 Kickstarter campaigns, we show that female entrepreneurs benefit more from making innovation claims than their male peers, especially in male‐dominated categories. While we suggested that these effects occur due to differences in backers' perceptions of the entrepreneur's ability, this mechanism was not supported in an experiment. However, we found that women are perceived as more able when launching crowdfunding campaigns in male‐dominated industry categories. Taken together, our research suggests that in reward‐based crowdfunding, women might benefit from violating gender expectations when backers view these violations as either positive or ambiguous.

Research summary We apply insights from research in social psychology and labor economics to the domain of entrepreneurial finance and investigate how founder chief executive officers' (founder CEOs') facial attractiveness influences firm valuation. Leveraging the novel context of initial coin offerings (ICOs), we document a pronounced founder CEO beauty premium, with a positive relationship between founder CEO attractiveness and firm valuation. We find only very limited evidence of stereotype‐based evaluations, through the association of founder CEO attractiveness with latent traits such as competence, intelligence, likeability, or trustworthiness. Rather, attractiveness seems to bear economic value per se, especially in a context in which investors base their decisions on a limited information set. Indeed, attractiveness has a sustainable effect on post‐ICO performance. Managerial summary ICOs allow ventures to collect funding from investors using blockchain technology. We leverage this novel funding context, in which information on the ventures and their future prospects is scarce, to empirically investigate whether the founder CEOs' physical attractiveness is associated with increased funding (i.e., amount raised) and post‐funding performance (i.e., buy‐and‐hold returns). We find that ventures with more attractive founder CEOs outperform ventures with less attractive CEOs in both dimensions. For ICO investors, this suggests that ICOs of firms with more attractive founder CEOs are more appealing investment targets. Our findings are also interesting for startups seeking external finance in uncertain contexts, such as ICOs. If startups can appoint attractive leaders, they may have better access to growth capital.

Research Summary We examine the effects of founder teams' firm‐ and industry prior work experience on startup growth in the context of high technology industries. We study these effects both on the early growth of startups and on their growth, after accumulating experiential knowledge. Integrating the literatures on human capital, imprinting and competency traps, we develop a typology of four combinations of founder prior experience: founder same firm and same industry experience, founder same industry but other firm experience, founder same firm but other‐industry experience, and founder other‐industry and other firm experience. Using data from 153 Israeli high technology startups, we find significant variations in the effects of these combinations on startup growth, which also vary between the early and later years of these startups. Managerial Summary Founders play a key role in the lives of their startups, applying their resources, knowledge and experience. Therefore, we ask: how does founder experience influence high technology startups' growth? To answer this question, we examine four combinations of founder prior experience: founder same firm and same industry experience, founder same industry but not same firm experience, founder same firm but other‐industry experience, and founder other‐industry and not same firm experience. Our analyses show significant differences in startup growth based on these combinations of founder prior experience and, importantly, the effect of these four combinations on startups' growth in their early years of existence differs significantly from later years, when these firms can increasingly draw on their own experiential learning.

Research Summary When evaluating Internet‐based loan project of small and medium size enterprises (SME), lenders can rely on easy‐to‐understand risk ratings or more sophisticated financial information. We investigate lenders decisions and its effect on loan funding success on the marketplace‐lending platform Zencap. The data set has been provided by the platform Zencap and includes 414 SME marketplace loans and 2,196 lenders. The data examined provide strong support for the importance of simple platform ratings in influencing investor behavior, while the effect of more detailed financial information is less pronounced, controlling for relevant variables. Higher interest rates appear more profitable to investors without any serious concern about non‐repayment. Managerial Summary Platform managers and potential borrowers are interested in how to encourage lenders to pledge their money on marketplace‐lending platforms. We investigate the influence of easy‐to‐understand risk ratings and more sophisticated financial information on investment decisions and their effect on loan funding success on the marketplace‐lending platform Zencap. We investigate 414 SME marketplace loans and 2,196 lenders. We find that for marketplace lending on Zencap the effect of more detailed financial information is less pronounced than easy‐to‐understand risk ratings. Platforms base risk ratings on information other than the entrepreneurs' financial information.