Knowledge that Transforms

Research Summary Financial resource acquisition is crucial for ventures but hindered by uncertainty. While signaling mitigates this uncertainty, its effectiveness hinges on venture novelty and the narratives used to clarify embedded information. Adopting a configurational lens, we examine the interplay among novelty, signals, and narratives in equity crowdfunding (ECF). Applying qualitative comparative analysis (QCA) to 98 ventures on a UK ECF platform, we reveal multiple equifinal pathways to fundraising success and demonstrate that novelty acts as a critical contingency factor: novel and less‐novel ventures require distinct configurations of signals and narratives, and narratives that clarify signals play a crucial role for novel ventures. Our findings extend research on signaling theory, entrepreneurial narratives, and entrepreneurial finance with a nuanced understanding of the interdependence among novelty, signals, and narratives. Managerial Summary Novel and less‐novel ventures face distinct challenges in convincing investors, and we show that there is no “one‐size‐fits‐all” strategy in fundraising. Our study demonstrates how entrepreneurs can convince investors using signals and/or narratives that align with the novelty of their ventures. For novel ventures, specific and coherent narratives are particularly helpful in clarifying signals that contain complex information. Conversely, less‐novel ventures that refine existing offerings may improve fundraising performance by simply emphasizing signals that demonstrate clear product‐market fit. We therefore suggest that entrepreneurs should view signals and narratives as complementary tools and tailor their fundraising strategies to match their ventures' novelty and achieve fundraising success.

Research Summary Government policy that aims to stimulate business activity often overlooks its indirect impacts on entrepreneurial entry. In particular, the role of free time, especially in concert with liquidity constraints, remains an underexplored factor. In this paper, we exploit two exogenous shocks to workers' free time to furnish plausibly causal effects on entrepreneurial activity: (random) injury and the 2011 amendments to the Illinois workers' compensation laws. Utilizing a two‐way fixed effects estimation, we find that as workers' compensation becomes less generous, that is, by limiting both financial resources and an employee's time away from work, entrepreneurial activity within a specific geographical region is significantly reduced. Thus, we provide evidence of an unintended and negative impact on entrepreneurial activity caused by an indirect policy change. Further, this result unduly affects the recently injured or otherwise disabled. Our results are robust to alternative specifications and data sources, suggesting an important incidence of compensatory insurance regulation on entrepreneurial activity and, as a result, important considerations for future policymaking. Managerial Summary Workers' compensation is a state‐level program that provides replacement wages to workers injured on the job. In 2011, amendments to Illinois' workers' compensation laws made this program less generous in terms of both financial benefits and time out of work. We study the impact of these amendments on entrepreneurial activity. We find that less generous workers' compensation has a large adverse effect on entrepreneurial activity because it constrains two important factors required for experimentation with entrepreneurship: financial resources and time. Our results hold up to several statistical models and controls, including local innovative and high‐tech firms, as well as alternative datasets. Our findings yield important insights for policymakers in other states drafting such regulations and for researchers studying the incidence of such policies.

Research Summary We examine how entrepreneur‐expressed humility affects early stage investors' willingness to fund new ventures. In pitching contexts where investors rely on relational cues and implicit prototypes of entrepreneurs, we theorize three distinct pathways through which expressed humility shapes funding decisions. First, building on research regarding interpersonal signals in early stage valuation, we propose that humility fosters perceptions of interpersonal affect and trust and team‐building qualities, increasing investors' willingness to fund. Second, drawing on implicit leadership theories, we argue that humility may trigger negative perceptions regarding the entrepreneur's ability to make rapid and risky decisions. Across a videometric analysis of 140 real‐world pitches and a randomized experiment with French early stage investors, we show that expressed humility elicits both pathways, but investors prioritize positive attributions. Managerial Summary Although humility is often regarded as a positive leadership trait, it contradicts implicit prototypes of successful entrepreneurs, who are typically seen as dominant and assertive. We examine how early stage investors perceive and respond to displays of humility during pitches. We propose that entrepreneur‐expressed humility produces ambiguous effects: It enhances perceptions of interpersonal affect and trust and team‐building qualities, but raises doubts about the entrepreneur's ability to make rapid and risky decisions. Using a videometric analysis of 140 pitches from the French version of Shark Tank and a randomized experiment with venture capital investors, we find evidence for these competing pathways. Overall, investors prioritize the positive attributions of interpersonal skills, suggesting that entrepreneurs benefit from expressing humility when pitching.

Research Summary Using a panel of 2688 city‐year observations of German fintech ventures and entrepreneurial support organizations (ESOs), we examine how ESO presence relates to venture entry. We argue and demonstrate that this relationship is contingent on local founding conditions. We find that ESO presence is most strongly associated with entry in thin ecosystems, while this association weakens in more active and developed contexts. Patterns in entries of non‐supported versus ESO‐supported ventures, along with differences across ESO types, support our argument that primarily ecosystem‐level bridging mechanisms, such as legitimacy diffusion, knowledge spillovers, and access to relational networks, are sensitive to local conditions, whereas direct support provided by ESOs to program participants is not context‐dependent. Managerial Summary Entrepreneurs, entrepreneurial support organizations (ESOs), and ecosystem builders benefit from understanding the broader economic and entrepreneurial context. In well‐developed ecosystems, informal networks can provide access to knowledge, collaboration opportunities, and legitimacy signals, reducing the marginal contribution of additional ESO presence in the ecosystem. In less‐developed ecosystems, ESOs can support venture formation by bridging entrepreneurs to networks, partners, and markets, and by mitigating resource scarcity and the challenges of newness. Structured programs, targeted mentorship, and guidance can support venture entry across the ecosystem, complementing existing informal networks and addressing gaps where they exist. Our findings suggest that the role and potential impact of ESOs vary with local founding conditions, emphasizing the importance of aligning support mechanisms with ecosystem maturity and structural characteristics.

Research Summary We explore the impact of new venture team (NVT) stability on long‐run organizational growth. With an instrumental variable design, we leverage a matched employer‐employee dataset of all Danish new ventures from 1981 to 1997. We find strong evidence that NVT stability has a positive effect on organizational growth in employees and that the effect grows stronger over time. We also find that stability is especially impactful for larger teams and for teams with higher education levels. The gains from stability also appear to be driven entirely by mixed‐gender teams. We connect our findings to the literature on NVT dynamics and suggest avenues for future research. Managerial Summary Stability within founding teams is crucial for the longevity and expansion of new ventures. We examine a dataset of Danish startups and find that ventures with stable founding teams demonstrate a 16.1 percentage point higher likelihood of survival and a 20.4% increase in average size after 10 years. This effect is accentuated in larger, more educated, and gender‐diverse teams. For entrepreneurs, these insights underscore the importance of not only assembling a strong initial team but also maintaining its composition to leverage growth opportunities as the business evolves.

Research Summary This paper examines the creation of entrepreneurial opportunities under coupled technical and demand uncertainty within science‐based ventures (SBVs). Whereas opportunity creation theory emphasizes discursive processes, we build on practice theory and pragmatism to explore how SBV opportunities also emerge through entrepreneurs' evolving engagements with indeterminate material artifacts. Through a longitudinal multiple‐case study, we identify two patterns of material engagement: epistemic engagement, oriented toward knowledge creation, and pragmatic engagement, oriented toward practical use. We show how opportunity creation unfolds through interweaving cycles of epistemic and pragmatic engagement. By introducing material engagements as constitutive, we specify creation theory for SBVs and highlight the central role of materiality in shaping belief formation, opportunity objectification, stakeholder engagement, and the variation–selection–retention process. Managerial Summary This paper explores how entrepreneurs create science‐based ventures (SBVs) by engaging with evolving material artifacts, like sensors and prototypes. Based on a study of SBV initiatives supported by the European Commission's ATTRACT program, we identify a process in which entrepreneurs repeatedly alternate between epistemic engagement—focused on scientific understanding—and pragmatic engagement—focused on usability and implementation. This material engagement cycle plays a central role in venture development under coupled technical and demand uncertainty. We highlight tensions inherent in this process and the strategies through which they are accommodated, offering practical insights for entrepreneurs building ventures from frontier science and policymakers supporting science commercialization.

Research summary Entrepreneurship unfolds under uncertainty, which complicates entrepreneurs' efforts to align idea, action, and environment to reach product–market fit. To illuminate how entrepreneurs perform such alignment, we complement the theory‐based view and its focus on cognitive uncertainty with a discussion of behavioral uncertainty. We propose that entrepreneurs face four types of uncertainty: (1) uncertainty about the state of their environment (state uncertainty), (2) uncertainty about the interpretation of environmental cues (perception uncertainty), (3) uncertainty about the feasibility of turning an idea into a tangible product (execution uncertainty), and (4) uncertainty about the effect of their action in the environment (effect uncertainty). To mitigate these forms of uncertainty, entrepreneurs engage in idea–environment (entrepreneurs as visionaries), idea–action (entrepreneurs as engineers), and action–environment (entrepreneurs as experimenters) alignment. Each of these alignment strategies is associated with benefits and constraints in mitigating the uncertainty discussed. Our paper thus generates new insights into the nature of uncertainty and its effective mitigation in the quest for product–market fit, a critical precursor of success in entrepreneurship. Managerial summary Entrepreneurship succeeds when product and market are aligned. We map two sources of uncertainty that stand in the way of reaching product–market fit. Agentic uncertainty concerns the entrepreneur: interpreting signals (perception uncertainty) and making the idea work (execution uncertainty). Environmental uncertainty concerns the market: what state the market is in (state uncertainty) and how the market will react to products (effect uncertainty). Entrepreneurs can mitigate these uncertainties via three complementary strategies: (1) idea–environment alignment (“visionary” scanning the environment), (2) idea–action alignment (“engineering” to prove feasibility), and (3) action–environment alignment (“experimenter” testing to learn what sells). Each alignment strategy yields benefits and costs toward reaching product–market fit. In combination, they accelerate product–market fit—a critical driver of success in entrepreneurship.

Research Summary We examine how promotional language (“hype”) in reward‐based crowdfunding is associated with campaign success, and whether those associations vary across sector contexts and with campaign execution burden. Using dictionary‐based text measures from 635 U.S. Kickstarter campaigns across five sectors, we distinguish three novelty‐framing moves: capability/rigor language, excellence/status language, and attitude/affect language. We find no uniform association between aggregate hype and success. Instead, the observed associations vary systematically across rhetorical moves, sectors, and goal levels. Capability/rigor language is positively associated with success in Technology, attitude/affect language is positively associated with success in Entertainment, and excellence/status language is negatively associated with success in Design. Beyond these sector differences, the paper's clearest cross‐cutting pattern is that capability/rigor language becomes more positively associated with success as funding goals increase. Managerial Summary The value of “hype” on Kickstarter depends on what is said, what is being offered, and how ambitious the ask is. In our data, Technology campaigns are more positively associated with success when descriptions emphasize testing, technical specificity, and execution readiness, whereas Entertainment campaigns are more positively associated with attitude/affect language. In contrast, excellence/status claims are associated with lower success in Design. Across contexts, the clearest pattern is that feasibility‐oriented language becomes more positively associated with success as funding goals increase, suggesting that larger asks benefit more from cues of deliverability than from undifferentiated promotional intensity.

Research Summary How is the ownership distribution in new venture teams (NVTs) related to the novelty of a firm's inventions? Using an abductive approach and analyzing 5114 projects from 2148 German firms, we find higher novelty when a majority owner is among the NVT members and when members of NVTs with unequal ownership splits participate directly in inventive projects. Our empirical facts and interview evidence suggest that unequal splits enhance decision‐making mandates, enabling NVTs to avoid consensus deadlocks and empowering owner‐inventors to foster novelty. Notably, the ownership split within the NVT appeared to matter more for novelty than the specific share held by owner‐inventors. These insights contribute to our understanding of the interplay among intra‐team ownership, organizational governance, inventor‐entrepreneurs, and innovative outcomes in entrepreneurial ventures. Managerial Summary At incorporation, new venture teams (NVTs) decide how to divide ownership among themselves. The distribution can vary from equal shares to a majority ownership structure. Ownership distribution can influence how NVTs make decisions under uncertainty and how independently individual NVT members can implement their idiosyncratic technological ideas. Our quantitative and qualitative findings indicate that concentrating ownership with majority owners promotes more radical innovations, while an equal distribution entails the risk of leading only to incremental advances. Additionally, in NVTs with unequal ownership distribution, the participation of NVT members in R&D activities promoted novelty. Therefore, NVTs should carefully consider the implications for decision‐making when determining their ownership distribution, as it can be a strategic tool for promoting innovation.

Research Summary Entrepreneurs make critical decisions in uncertain environments where information is limited, outcomes are difficult to predict, and multiple goals often compete. Yet, existing research offers scattered insights into how entrepreneurs dynamically adapt to such contexts and how their decisions are shaped by behavioral and cognitive foundations such as judgment, intuition, and experience. We shed light on these phenomena by exploring how decision‐making is influenced by factors at multiple levels, from individual traits and family dynamics to team interactions and organizational structures. A key aspect of our inquiry focuses on how entrepreneurs manage uncertainty by balancing economic goals, such as growth and profitability, with non‐economic objectives like social impact, sustainability, or knowledge advancement. By integrating these perspectives, this work offers a conceptual framework that connects antecedents, processes, and outcomes of entrepreneurial decision‐making under uncertainty and competing goals, providing a promising roadmap for future research. Managerial Summary Entrepreneurs often make decisions in uncertain environments, where they must contend with limited information and competing goals. This work explores how entrepreneurs balance economic objectives, such as profit, with non‐economic ones, like satisfying various stakeholders, achieving social impact, and sustainability. It highlights the role of individual, family, team, and organizational factors in shaping these decisions, offering novel insights into how entrepreneurs can manage trade‐offs, adapt feedback‐based strategies, and recalibrate priorities over time. For owners, managers, and business leaders, understanding these dynamics can lead to better decision‐making, improved risk management, enhanced strategic alignment, increased innovation, and a more balanced approach to growth.