Knowledge that Transforms

Integrating family firm innovation research with signaling theory, we develop a framework explaining market reactions to patents granted to family versus nonfamily firms. Using a U.S. dataset of 52,241 patents from 2014 to 2018, we find the stock market reacts more positively to patents granted to family firms than nonfamily firms. We then examine reactions to radical versus incremental patents. Patents reflecting radical innovation, measured by novelty and pedigree, create greater market value for family firms than nonfamily firms, although the pedigree effect is only marginally significant. By contrast, patents reflecting incremental innovation, measured by temporal depth, have little effect on nonfamily firms’ market value but reduce family firms’ market value.

We built a theory on how entrepreneurial ecosystem policy benefits some places within rural regions while leaving others behind. In a historical analysis of the Scottish Highlands and Islands, 1965 to 1990, we compared policies that attract external resources from outside the region with those that embed resources within local communities. We found that resource-attracting policies not only generated higher economic output but also concentrated opportunity, drained peripheral areas, and increased regional fragility. Resource-embedding policies produced lower aggregate output but greater spatial inclusion and resilience. Our historical analysis identifies spatial draining, disempowerment, and empowerment as mechanisms through which policy shapes ecosystem outcomes over time.

Cultural entrepreneurship research emphasizes the importance of storytelling and other cultural skills, yet recent work suggests that generative artificial intelligence (AI) levels the playing field for entrepreneurs lacking such skills. In this conceptual article, we challenge this view by outlining how the widespread use of AI tools likely leads to systematic changes in the institutional norms and expectations that shape entrepreneurial storytelling. Anchored in evidence-informed assumptions about average entrepreneurs’ use of AI, our theorization suggests that widespread AI adoption will lead to a homogenization in entrepreneurial storytelling—creating an evaluative environment that may require even greater cultural skills to navigate.

Venture capital (VC) transactions are impeded by two frictions: entrepreneurs cannot credibly signal quality to investors, and investors cannot fully protect themselves against governance risks in incomplete–contract relationships. We argue that top-tier law firms address both frictions: sell-side firms through signaling that reduces legitimacy deficits, buy-side firms through contractual expertise that protects investor interests. Using 71,129 global VC deals from 2005 to 2020, we find that top-tier law firm involvement is associated with higher ownership stakes, valuations, returns, and exit success. Both mechanisms are stronger in weaker legal environments. Results are robust to multiple identification strategies.

Are family firms born or made? We argue that firms become family-oriented as transgenerational intentions gain salience and reshape owners’ mindsets. Leveraging China’s one-child policy reform as an exogenous shock to within-family succession feasibility, we conduct a difference-in-differences analysis of 2,837 listed firms. We find that, relative to nonfamily firms, firms for which family succession is feasible increase R&D intensity following the reform, with the effect driven primarily by lone-founder firms. Our findings identify conditions under which founder-led firms transition toward family-oriented behavior, providing new insight into the “ made ” side of the born-or-made debate in family business research.

Although trust is critical for entrepreneurs in all markets, it likely differs in gray markets from that in white or black markets. In this inductive study, we find a coherent configuration of trust mechanisms in a gray market that offers new insights into how entrepreneurs can use their network (i.e., referrals and “lineaging”) and heuristics (i.e., “villageing”) to build trust in new stakeholders when trust formation is challenging and violations are costly. We also offer new insights into the practices for verifying (i.e., impromptu tests and extensive probationary periods) and maintaining (i.e., financial support) trustworthiness, as well as repairing trust.

This article investigates whether institutional conditions that limit employees to pursue hybrid entrepreneurship reduce potential high-growth entrepreneurship. Using the Alcatel v. Brown ruling, as an institutional change that curtailed hybrid entrepreneurial activity, we show that affected states experienced a marked decline in indicators of ventures with high-growth potential. Effects are strongest among early-stage ventures, consistent with hybrid entrepreneurship enabling low-cost experimentation. Venture capital investors also respond to reduced experimentation by increasing syndication and staging. Overall, the results show that institutional arrangements shape experimentation through hybrid entrepreneurship and, consequently, the supply of ventures capable of achieving high growth.

Entrepreneurship outcomes tend to be right-skewed and heavy-tailed, with a small fraction of “star” firms often accounting for a disproportionate share of value creation. Yet, how to define the “star” entrepreneurs driving these outcomes remains highly contested. In this paper, we argue that star identification is best understood as a modeling choice that depends on the research objective—no threshold rule can be evaluated as “optimal” or more “precise” independent of what the rule it is supposed to serve—and introduce a precision–recall framework that makes the trade-offs of threshold-based approaches more explicit. Using 13 years of Inc. 5000 data linked to subsequent public listings, we then compare nine threshold-based methods, including the recently proposed quantile absolute deviation procedure by Gala and Schwab (hereafter GS-QAD) which uses a bootstrap to set a cutoff tailored to the tail of the observed distribution. Three findings emerge. First, using simulations, we show that GS-QAD’s bootstrap procedure introduces systematic sample-size bias that can confound cross-industry comparisons. At the same time, as sample size grows, the method converges to a near-universal 17% to 20% rule. Second, firms classified as stars are 10 to 20 times more likely to become publicly traded and account for the majority of current market capitalization among publicly traded Inc. 5000 alumni. However, the choice of threshold determines a precision–recall trade-off in which no method dominates on all metrics. Finally, the probability of becoming a publicly traded company rises smoothly with revenue, with no detectable discontinuity at any threshold. We conclude that stars are where you draw the line—thresholds should be treated as modeling choices fit to the research or policy objective, validated externally where feasible, and reported with their explicit trade-offs.

Research on individual entrepreneurial orientation (Ind.EO) has yet to reveal the psychological conditions under which employees demonstrate Ind.EO in the workplace. Addressing this gap, we theorize that authenticity is a crucial mechanism linking identity-specific support to Ind.EO expression, thereby introducing an identity perspective to Ind.EO research. Using two-wave survey data from 952 employees among sexual and gender minorities in 47 countries, a validation study of 135 participants, and qualitative interviews, we demonstrate that authenticity fully mediates the effect of identity-specific support on innovativeness and proactiveness, but not on risk-taking. These results expand Ind.EO theory by incorporating an identity-based psychological dimension.

Despite extensive existing research at the individual/organizational level, it is unclear whether guanxi – predominantly conceptualized at the micro level – supports or constrains entrepreneurship at the societal level. Drawing on institutional theory and the recent guanxi literature conceptualizing guanxi as an informal institution, this study examines the effect of guanxi on entrepreneurship at the societal level by arguing that guanxi as an informal institution can both substitute for and compete with formal institutions. Specifically, we argue that guanxi institution facilitates societal-level entrepreneurship up to a point due to its stronger substitution effect for formal institutions than the competing effect. However, beyond that threshold point, guanxi reduces entrepreneurship stocks because the competing effect with formal institutions is stronger than the substitution effect. We also argue that development of formal institutions can attenuate the main inverted-U-shaped effect of guanxi institution on societal-level entrepreneurship. Fixed effects results with provincial-level panel data from China provide strong support for the hypotheses. This study contributes to the literatures on guanxi and on the role of informal institutions in entrepreneurship.