Knowledge that Transforms

Research Summary Different types of affective climates—norms related to the experience, expression, use, and regulation of emotions—have been shown to impact organizational outcomes. However, we know less about how these climates emerge. This study investigates the emergence of affective climates through a 22‐month longitudinal multiple‐case study of five early‐stage start‐ups. Our analysis revealed that an affective climate of high authenticity emerged in start‐ups through three key mechanisms: the interaction between positive and negative emotions, constructive meta‐emotions, and interpersonal emotion regulation characterized by emotional validation and problem‐solving. Our findings contribute to the understanding of affective climate emergence and offer nuanced insights into how founders, managers, and teams can cultivate constructive emotional dynamics in highly uncertain, fast‐paced environments. Managerial Summary We explore how affective climate emerges through a longitudinal case study of five start‐ups. Affective climate describes norms and assumptions concerning the experience, expression, use, and regulation of emotions. Research suggests that an affective climate of high authenticity—meaning that members feel free to express their actual emotions—contributes to creativity and performance while reducing burnout. However, prior research offers few insights into how and why different affective climates emerge in start‐ups. We find that managers and founders may shape their organization's affective climate toward high authenticity by fostering positive emotions, through an accepting attitude toward their own negative emotions, and by validating employees' emotions. By doing so, managers and founders can foster healthy emotional dynamics in their start‐ups.

Research Abstract We study how providing knowledge about “how to do entrepreneurship” influences women's pre‐entry decision to enroll in micro‐entrepreneurship training in poverty settings. We carry out a field experiment study with unemployed women in rural India, randomly exposing them to “founding templates” that depict simple and replicable business set‐ups and practices. We find that exposure to founding templates, especially those that exemplify social support rather than self‐dependence, significantly increases women's sign‐ups to entrepreneurship training. We also find that increased sign‐ups are accompanied by enhanced perceived ease of starting a business. These results shed light on what motivates women in the pre‐entry stage and offer insights on how to increase enrolment, ultimately broadening women's participation in entrepreneurship in poverty contexts. Managerial Abstract Micro‐entrepreneurship training is a widely used intervention to support women's participation in entrepreneurship in poverty settings. While existing research predominantly focuses on assessing the impact of such interventions, we ask when women are motivated to sign up for training in the first place. Our study involved a full‐day information workshop, targeting unemployed women in rural India and providing them with frameworks and practical examples of replicable business setups and practices. Results indicate that access to templates, especially those that exemplify social support rather than self‐dependence, significantly boosts women's confidence and motivation to consider entrepreneurship as a viable option. We thus identify a key institutional lever for broadening the funnel of women's entry into training and entrepreneurship.

Research Summary Building on prior research about the heterogeneous impact of labor shocks on individuals' propensity to start businesses, we explore how local labor market frictions affect individuals' selection into platform‐based entrepreneurship. Combining detailed data from a large online retail platform with sectoral employment statistics across labor market areas in the United States, we show that entrepreneurs entering the platform during larger local employment declines in related sectors developed more effective customer strategies and maintained stronger sales performance. These entrepreneurs focused more on customer appeal, matched social media channels with the platform's predominant user base, and lowered prices over time. Managerial Summary This article examines how local labor market frictions in sectors relevant to a digital platform shape the heterogeneous entry of individuals into platform‐based entrepreneurship—a class of entrepreneurship that became popular with “creator economy” business models where individuals rely on digital infrastructures to access potential customers and monetize their creative labor. We find that entrepreneurs who started platform‐based businesses in deteriorating local employment conditions generated significantly higher sales by being more attuned to customers' needs and wants. We show that these entrepreneurs emphasized customer‐related activities, chose more effective social media channels, and set lower prices after operating for a few periods. Our findings highlight the importance of customer‐related competitive advantages in platform‐based entrepreneurship.

Research Summary Extant studies suggest that a particular set of means, once in place, prompt entrepreneurs to enact effectual decision‐making. However, little is known about how such effectual means are developed, particularly when entrepreneurs' primary means are digital capital rather than pre‐existing effectual means. To address this gap, our qualitative research examines an emerging phenomenon in which young people engage in side‐hustling through social media. Our findings reveal that entrepreneurs develop effectual means by leveraging digital capital through browsing, consulting, and imitating. This developmental process is significantly streamlined by digital capital's generativity, recommendability, and multimodality, with its cost‐effectiveness dynamically assessed to determine the continuity of development. Drawing on these findings, we discuss implications for effectuation theory and entrepreneurship studies. Managerial Summary Entrepreneurs are known to rely on their established means for effectual decision‐making. However, little is known about how entrepreneurs make effectual decisions when they possess digital capital but have underdeveloped means for effectuation. This study explores how young side‐hustlers on social media build means for effectuation through browsing, consulting, and imitating. The generativity, recommendability, and multimodality of digital capital significantly enhance this developmental process, while cost‐effectiveness is continuously assessed to determine whether to proceed. We develop a process model that illustrates how entrepreneurs leverage and optimize digital capital to drive effectuation in the digital age.

Research Summary We investigate public support and venture capital (VC) investment in academic startups. Government support may enable follow‐on investment by providing a quality signal to investors. This signal is especially important for academic startups, which face large funding gaps due to their complexity, cutting‐edge nature, and uncertainty regarding the founders' management capabilities and commitment. Using a panel of startups in Germany, our analyses confirm that academic startups are more likely to obtain follow‐on VC investment after receiving public support than non‐academic startups. Further, this effect is limited in time, lasts longer for academic startups, is concentrated in high‐tech manufacturing firms, and is stronger for investments from business angels. Our findings have implications for policymakers seeking to foster academic entrepreneurship through policy programs and VC investment. Managerial Summary Obtaining seed and growth capital is essential for potentially highly innovative startups. We show that startups that obtain public support are more likely to receive VC funding and that this effect is stronger for startups with academic founders, approximately twice as large. We further show that this benefit is limited in time, concentrated in the high‐tech manufacturing industry, and more salient for business angel financing than for investment by independent VC funds or corporate VCs. For founders of academic startups, our results imply that acquiring public support might enhance the chances of attracting follow‐on financing.

Research Summary Existing research offers conflicting evidence on how corruption affects entrepreneurship. We adopt a contingency approach highlighting the role of generational imprinting. Drawing on imprinting and generational research, we argue entrepreneurs develop distinct generational imprints shaped by the environment during their formative years. Using a proprietary dataset of Chinese private firms, our findings suggest that in corrupt environments, market‐generation entrepreneurs with a transactional imprint tend to outperform their premarket‐generation counterparts in the short run, as the latter's principled imprint likely limits public relations spending. Personal life experiences—rural living and higher education—attenuate the influence of the transactional imprint, narrowing intergenerational differences in firm performance. Our study advances research on corruption and entrepreneurship by integrating institutional, generational, and individual‐level perspectives to explain how corruption affects entrepreneurs differently. Managerial Summary The relationship between corruption and entrepreneurship remains contested. Our study takes a novel angle by examining generational differences among entrepreneurs. We suggest that the distinct environments entrepreneurs experienced during adolescence shape their value orientations, leading to variation in firm performance in corrupt environments. Using a dataset of Chinese private firms, we show that, in corrupt environments, younger‐generation entrepreneurs with a transactional orientation (i.e., transactional imprint) tend to outperform older‐generation entrepreneurs with a principled orientation (i.e., principled imprint) in the short run. However, this performance gap narrows among those who lived in rural areas or received higher education. Our work highlights the crucial role of institutional environments in shaping entrepreneurs' values across generations and advocates for initiatives that cultivate more ethically grounded entrepreneurial mindsets.

Research Summary The emotional rollercoaster of entrepreneurship is characterized by encounters with challenges that impede venture progress. Consequently, resilience, which is reflected in the ability to maintain functioning through such challenges, has become of particular interest to scholars. Existing research emphasizes the ability of resilient individuals to use positive emotions to overcome challenges. Yet, scholarship has largely overlooked the role of affective fluctuations in resilience processes, which is problematic for entrepreneurs facing the chahighs and lows of venturing. This daily diary study of technology entrepreneurs reveals that those who are more resilient report smaller day‐to‐day fluctuations in their affective state over the course of two working weeks. This finding suggests that theory on self‐regulation may serve as an important key in understanding the microprocesses underlying resilience. Managerial Summary Entrepreneurship is often considered an emotional rollercoaster. For this reason, many entrepreneurs are interested in understanding resilience and its role in managing the ups and downs of business venturing. This research examines the relationship between resilience and fluctuations in affect by studying entrepreneurs over the course of two working weeks, as they confront a challenge in their venture. The results show that entrepreneurs who are more resilient also report smaller changes in affect day‐to‐day. This suggests that entrepreneurs looking to enact resilience may need to turn the emotional rollercoaster of entrepreneurship into a train ride.

Research Summary Upfront payments are important financial resources startups seek to negotiate in technology alliances. This study unpacks how venture‐backed startups can benefit from their VC affiliations and obtain better payments. We develop a bargaining framework and argue that VCs can strengthen venture‐backed startups' hand in alliance negotiations through two distinct pathways: (i) by providing a quality signal, and (ii) by serving as conduits of alternative partnering options. We further suggest that these distinct benefits in bargaining hinge on startups' technological quality, which substitutes for the quality signal arising from VC affiliations but complements the VC's intermediation role in markets for partners. The evidence therefore identifies the distinct and complex channels by which VCs can help startups obtain financial resources at nascent stages through their technology alliances. Managerial Summary Upfront payments in technology alliances are vital revenues for technology startups. This study reveals how venture capital (VC) affiliations strengthen startups' bargaining position and enable them to secure larger payments. VCs add value in startups' alliance negotiations in two key ways: by signaling the quality of the startup's resources and by providing alternative partnering options. The benefits of these mechanisms vary with the startup's technological quality—strong technology can substitute for the VC's quality signal but enhances the value of VC intermediation. Managers should recognize that VCs add value to their ventures beyond financing by also reinforcing their investee startups' bargaining power, helping startups negotiate favorable terms in technology alliances.

Research Summary We explore how changes in labor unions and related labor environments affect employees' likelihood of starting a new business. We suggest that the enactment of stringent anti‐union laws reduces incentives for employees to stay with their respective workplaces and increases the attractiveness of becoming self‐employed. Using the adoption of right‐to‐work (RTW) laws in Michigan and Indiana as a quasi‐natural experiment, we find that the likelihood of employees becoming self‐employed increased by 53% compared with that of states without RTW laws. Moreover, this tendency is more pronounced for blue‐collar and low‐wage workers who start unincorporated businesses. These findings offer novel insights on the relationship between anti‐labor environments and necessity‐driven entrepreneurship by focusing on individual‐level incentives in non‐knowledge‐intensive sectors. Managerial Summary Changes in employment conditions influence employees to consider starting their own businesses, yet our understanding of how these changes drive individuals toward entrepreneurship remains limited. This study explores how weakened labor union power affects workers' engagement in entrepreneurial activities, with a focus on the types of employees impacted and the businesses that they start. By examining the adoption of RTW laws in Michigan and Indiana, we find that weakened labor union power disproportionately affects blue‐collar and low‐wage workers, increasing their likelihood of starting unincorporated businesses. These results suggest that managers and policymakers should consider the challenges faced by these workers and how changes in employment conditions may shape their career choices.

Research Summary The paper explores how the deep historical roots of informal institutions influence current informal businesses. It proposes that both pre‐colonial institutions—the tradition of cousin marriage—and the subsequent shocks of colonization still impact the performance of informal firms. We theorize on how the effects of historical family systems are moderated by the traumatic and spatially heterogeneous shocks of colonialism, in particular the cultural values of the colonizers (individualism) and their religious (missionary) activities. Our hypotheses are tested by regression analysis based on surveys of informal businesses in multiple regions of eight African countries. We find that the cousin marriage tradition is negatively associated with the performance of current informal businesses though this relationship is attenuated in places where colonizers were more individualistic. Managerial Summary This paper explores how the pre‐colonial family institutions—the tradition of cousin marriage—and the subsequent shocks of colonization jointly impact the performance of contemporary informal firms in sub‐Saharan Africa. We propose that the historical tradition of cousin marriage has persistent and negative effects on the revenue and labor productivity of contemporary informal businesses. This is because informal entrepreneurs in ethnic areas with the cousin marriage tradition may prioritize social obligations over economic incentives. However, these relationships are attenuated in ethnic areas colonized by European countries with more individualistic cultural values. Our findings highlight the importance for business owners and managers to understand the deep historical roots of the social norms of the communities and groups with which they interact.