Knowledge that Transforms

Most research on entrepreneurship focuses on entrepreneurs' human and social capital as the drivers of new venture performance. However, less is known about how much the endowments of other strategic human resources, namely board directors, influence new venture performance. To generate new insights on this topic, we theorize and empirically investigate to what extent, and under which conditions, the experience of outside board directors affects new venture growth. Our analysis of Norwegian registry data on 15,594 new ventures does not provide immediate evidence that the presence of outside board directors or their experiences drive new venture growth. However, post hoc analysis suggests that the timing of board entry, combined with industry and directorial experience, plays a significant role in shaping growth outcomes. Additionally, the impact of industrial and directorial experience varies depending on the industry environment. • Outside board directors bring limited benefit to new ventures unless they have specialized expertise and proven experience. • The impact of outside board experience is greatest for newly appointed members with with industry experience. • Appointment timing matters: combining industry expertise with directorial background in outside board members drives growth. • In volatile sectors, outside directors with industry expertise provide much more benefit than directorial background alone.

The present paper argues and tests the proposition that firms with older top and middle managers produce fewer entrepreneurs, because these firms offer less chances to their employees to enter managerial positions that provide valuable experience for entrepreneurship (rank effect theory). Empirical work using linked employer-employee microdata for Portugal support this. The rank effect is stronger in firms with older top managers. Employees who progress slower into managerial ranks are not pushed into entrepreneurship but are more likely to take on jobs as employees in other firms. Overall, our results suggest that firms with younger management ranks offer more chances for workers to enter managerial positions and, therefore, spawn more entrepreneurs. A common career pathway leading towards entrepreneurship materializes through gaining experience working as a wage employee. In particular, work in top and middle management roles involving leadership and responsibility for strategic decisions should provide experience, knowledge and networks that are valuable for entrepreneurship. Founders of prominent unicorns and start-up ventures throughout the world have acquired significant managerial experience. Top and middle management roles often involve tasks that demand a broad range of skills associated with obtaining and deploying resources, as well as organizing and managing people. Furthermore, top and middle managerial positions expose individuals to ample opportunities for obtaining new knowledge and learning, including knowledge about new business opportunities. A recent theory named the rank effect suggests that in societies with older workforces, younger workers are less likely to become entrepreneurs because they are unable to acquire the experience and skills required for entrepreneurship. In aging societies, top and middle managers are more likely to be older and hold on to their positions for longer, thereby blocking younger subordinates from reaching managerial ranks. Since younger people are more likely to possess the energy, creativity, risk-taking and innovative abilities that enable and motivate entrepreneurs, if fewer young employees hold top and middle managerial ranks (so they can acquire essential experience), entrepreneurship rates will likely decline. Arguably, the rank effect argument overlooks that, if workers are indeed blocked from progressing to managerial positions in firms with older workforces and managers, frustration caused by lack of career advancement may also lead them to leave, either by seeking employment in another firm, or possibly by becoming entrepreneurs themselves. If non-managerial workers frustrated with lack of career progress are more likely to become entrepreneurs, the basic argument of rank theory – that managerial experience is a vital determinant of entrepreneurial ability and motivation – is significantly weakened. In this article we look at how corporate careers unfold over time towards entrepreneurship, focusing on whether reaching top and middle managerial ranks is indeed a steppingstone towards entrepreneurship. In particular, we seek to find out whether firms with older top and middle managers offer lower chances for workers to reach key managerial ranks and, as a byproduct of those lower chances, are less likely to spawn entrepreneurs. We also examine whether slower than average career progress towards managerial ranks is likely to lead employees to entrepreneurship, or to move jobs to a different firm. Lastly, we test if obtaining top managerial experience may be more strongly linked with likelihood of entrepreneurial transition than obtaining middle managerial experience. To test our ideas, we use detailed matched employer-employee data for Portugal and focus on wage workers who start a new job spell between 2005 and 2015. We use discrete-time hazard models to investigate whether the age structures of firms' managerial workforces are related with a reduced likelihood for the firm's employees to become entrepreneurs, by lowering their chances to progress in their careers by reaching top and middle managerial roles. Our main results indicate that top and middle management experience increases the likelihood of workers becoming entrepreneurs, with top management experience leading to the highest likelihood of entrepreneurial transitions. In firms with older managers, workers are less likely to reach key managerial positions and, therefore, less likely to become entrepreneurs. We also find that slower than average advancement towards managerial ranks is likely to lead workers to move to jobs in other firms, but not to entrepreneurship. Our results suggest that holding top and middle management ranks is an important steppingstone for those individuals whose career path progresses from wage employment to entrepreneurship. A firm's propensity to produce entrepreneurs likely depends not just on its ability to generate new ideas and products but is also related with the age structure of its managerial workforce. Moreover, firms' organizational forms and structures, as they relate to the numbers and functions of top and middle managers, are also likely to influence the spawning of entrepreneurs. • We argue that working in firms with older managers lowers one's chances of becoming an entrepreneur • This happens because in firms with older managers workers are less likely to have reached managerial ranks • Aquiring managerial skills and experience increases the likelihood of becoming an entrepreneur • These propositions are supported using detailed matched employer-employee data from Portugal • The results support the proposition that entrepreneurship is likely to decline in aging societies

Hyped ventures attract valuable resources by framing their goals in line with the hype. However, in doing so they risk adopting problematic conduct that undermines their moral legitimacy and requires repair. To explore the overlooked internal dynamics of this phenomenon, we conduct a longitudinal case study of a hyped fintech venture that lost and repaired its legitimacy. Our paper uncovers that how hyped ventures frame the moral boundaries of the pursuit of growth influences their conduct and, in turn, facilitates the loss or repair of their legitimacy. Two dynamics underline this process: the activation of intense emotions among employees and the entrenchment of distinct organizational cultures. Importantly, our study reveals that when ventures are hyped, a “growth at all costs” frame risks kindling “antagonistic excitement” among employees and facilitating a “hubristic culture” that supports morally reckless practices. By shedding light on these dynamics within hyped ventures, our study contributes to scholarship on entrepreneurial framing, cultural entrepreneurship, and tech venture legitimacy.

While resource-dependency theories suggest that heterogenous directors in new venture boards contribute important knowledge and networks, research on boardroom homophily highlights that dissimilar directors are more likely to leave, especially under adverse conditions. To date, there is limited evidence on whether such mechanisms also prevail in the venture context where founder-managers retain excessive control over director appointments. We analyze director tenure in 28,295 Swedish ventures, finding that dissimilar directors are more likely to leave the board when ventures are operating in favorable conditions but only when considering knowledge diversity. Post-hoc analyses of directors' post-exit career paths and qualitative interviews with CEOs and directors help clarify the mechanisms that cause diverse directors to depart venture boards more often. Specifically, lifecycle demands and venture profitability ease resource-dependence pressures on director retention, thus feeding homogeneity in board expertise. Our findings provide insights into the homogenizing nature of new ventures' upper echelons as they evolve into mature organizations. Executive summary Boards are a vital resource for early-stage ventures, offering advice, funding connections, and strategic guidance — especially when directors bring diverse expertise. Yet, as ventures grow and succeed, that diversity can erode. Our study of over 28,000 Swedish owner-managed firms shows that directors whose expertise differs from that of the founder(s) are more likely to leave—not during hardship, but when the business is performing well. Interviews with several founders and directors further suggest that as ventures mature, they increasingly rely on internal capabilities and shift toward boards that reflect the founder's evolving preferences. These dynamics lead to more homogenous boards over time, potentially narrowing the range of perspectives available in the board. For founders and policymakers, the findings highlight a key challenge: keeping diverse directors around not just at the start, but as the company scales.

Coordination frictions prevent the efficient adoption and governance of blockchain-based platforms. Crypto funds (CFs) create value by smoothing frictions on decentralized digital platforms (DDPs). CF-backed DDPs obtain higher valuations in the primary token market, outperform their peers after issuing tokens, and benefit from token price appreciation around CF investment disclosure in the secondary market. Primary transaction data from the Ethereum ledger shows that the valuations of DDPs with meager adoption and a higher centralization of token ownership benefit more from CF backing. The positive valuation and performance effects for CF-backed DDPs are more pronounced for CFs that are more central in investor networks.

Hype is a collective vision and promise of a possible future, around which attention, excitement, and expectations increase over time (Logue & Grimes, 2022). Entrepreneurs employ cultural strategies, using framing to legitimize their endeavors and sustain the surrounding hype. Despite the importance of media in entrepreneurial hype, extant literature has yet to investigate media framing devices and how they shape and inform social expectations in the hype cycle. We also know that framing efforts are shaped by discursive struggles between actors (Kriechbaum et al., 2021) and that under-represented social groups are more constrained by dominant discourses. Yet, extant literature on entrepreneurial hype has thus far undertheorized power and inequality. We focus on one under-represented group - women – as they embody a glaring example of how media influence the social expectations associated with their entrepreneurial endeavors. Specifically, this study investigates how the media employ framing devices to generate social expectations for non-dominant groups (women entrepreneurs in our case) - and shape the hype cycle. To do so, we empirically analyze the evolution of the ‘girlboss’ hype, through a content analysis of 2671 media articles. Our contributions advance studies on entrepreneurial hype by explicating the role of media in the construction of hype. We contend that gender affords a critical power lens in the study of entrepreneurial hype that can be transferred to other contexts mired by inequality. We advance that feminist interrogations of media and entrepreneurship can contribute to understanding and addressing issues beyond gender. • Media framing devices are highlighted as driving forces of hype and contributing to the transition from "boom" to "bust" in hype cycles • Research on entrepreneurial hype privileges entrepreneurs framing efforts. We lack insights on media framing efforts • A post-feminist and neoliberal lens enhances our understanding of the implications of the cultural narrative surrounding women entrepreneurs and how they are often ‘designed to fail’. • Post-feminist theoretical approaches provide opportunities for the study of entrepreneurship and inequality

Drawing on entrepreneurial financing literature, we investigate how venture capital (VC) firms' investment horizons affect their ventures' product quality problems. We argue that when a VC firm has a short investment horizon, it may guide its portfolio companies to develop new products fast to increase the likelihood of successful exits. However, this deliberate effort may act as a double-edged sword for ventures. That is, VC firms' guidance on product commercialization could inadvertently expose ventures to product quality problems. Building on this notion, we suggest that ventures backed by VC firms with short investment horizons may experience more product quality problems than those backed by VC firms with long investment horizons. We further suggest that the effect of a VC firm's investment horizon on product quality problems is mitigated when the venture is invested by corporate VC investors but amplified when the venture develops complex products. We test our hypotheses using a dataset on product recalls of VC-backed ventures in the U.S. medical device industry. Executive summary The success and survival of new ventures largely depend on their ability to develop and commercialize innovative products. Due to their limited resources, these ventures often seek support from venture capital (VC) investors. However, the involvement of VC investors can be a double-edged sword, as their focus on timely (or even accelerated) product introduction may lead to unforeseen problems. This occurs because VC firms may adopt different approaches to supporting ventures in new product development, depending on their investment horizons, which are constrained by their contractual obligations to their limited partners (LPs). Specifically, VC firms with long investment horizons may allow their portfolio companies to have sufficient time to develop new products. In contrast, VC firms with short investment horizons may be under time pressure and guide their portfolio companies to speed up the product development process to increase the chances of ventures' exits within a limited timeline. Building on this notion, we examine how the investment horizons of VC investors impact ventures' product quality problems. Ventures invested by VC firms with short investment horizons may face pressure to accelerate the new product development process, preventing the ventures from engaging in time-intensive learning processes necessary for cultivating new technological and market knowledge. Therefore, we propose that ventures invested by VC firms with short investment horizons may experience more product quality problems than those invested by VC firms with long investment horizons. We further propose two boundary conditions to validate our theoretical mechanisms. First, we suggest that the negative effect of VC investors' time horizons on product quality problems is mitigated by the presence of corporate VC (CVC) firms in the investment syndicate. As CVC firms have long investment horizons and pursue strategic goals, they can counterbalance the influence of VC firms with short investment horizons on ventures' product development process. Second, we suggest that the complexity of the products developed by ventures amplifies the impact of VC firms' investment horizons on product quality problems. This is because complex products require more time for intensive learning and information processing, making ventures particularly susceptible to product quality problems when under time pressure. To test these arguments, we use the data on product recalls of VC-backed ventures in the U.S. medical device industry. We also incorporate insights from interviews with venture capitalists and entrepreneurs to validate our arguments. This study enhances our understanding of how partner-specific characteristics (VC firms' investment horizons in our context) affect private ventures' development paths and outcomes. By highlighting the tradeoffs associated with VC funding, we provide a more balanced perspective to the literature on VC investments, which has predominantly emphasized the benefits of VC investment. Our arguments and findings suggest that the time pressure faced by VC investors can be transferred to ventures, potentially resulting in unexpected product quality problems.

In equity crowdfunding (ECF), early investments serve as signals of venture potential to prospective investors, making them more likely to join an offering. We argue that ECF platform team members can exploit this mechanism and convey false signals to unsophisticated investors. Data from a prominent ECF platform indicate that platform team members “invest” in ventures that exhibit weaker post-campaign outcomes. However, in ventures that successfully fundraise, platform team members typically withdraw their investment (after it incentivized others to join), and these ventures show even weaker post-campaign outcomes. Finally, ventures' post-campaign outcomes are particularly weak when this “invest-and-withdraw” tactic is executed by the platform's upper echelons, whose investments can further be perceived as endorsement signals by the crowd, despite significant goal incongruence between the upper echelons and the crowd. Our study presents novel theoretical and empirical insights into the signaling, financial misconduct, and ECF literature, and holds important policy implications. Past research has shown that equity crowdfunding (ECF) platforms can reduce agency problems between entrepreneurs and ECF investors, such as adverse selection problems, by providing selection and due diligence activities. In other words, past research has focused on the bright side of ECF platforms. However, this study focuses on a possible dark side of ECF platforms. The paper investigates the practice of ECF platform team members fabricating support (i.e., using an invest-and-withdraw tactic) towards firms with weaker prospects listed on their own platform. ECF platform team members can use an invest-and-withdraw tactic in firms with weaker prospects. Indeed, through their investments, ECF platform team members influence early investments, which are often used by prospective ECF investors as a quality signal to influence their own investment decisions. However, platform team members then withdraw their investments (after their investment lured follow-on investors to the offering). As such, platform team members convey false signals to unsophisticated ECF investors. The paper highlights an underexplored agency problem between ECF platforms and investors, where platform goals (such as higher platform fundraising success rates and increasing revenue generation, which require platforms where more deals get done) may conflict with investor interests. Theoretically, these agency problems and the fact that one can withdraw investments at zero cost during a cooling-off period may explain why ECF platform team members engage in false signaling to support firms with weaker prospects. More specifically, we expect that platform team members will invest in firms with weaker post-campaign prospects. Also, their investment withdrawals are expected to be especially correlated with weaker post-campaign venture outcomes. Finally, the investments of the platform’s upper echelons are expected to be particularly correlated with weaker post-campaign outcomes. Empirically, we use unique data from a leading ECF platform from a country with developed financial markets. The paper provides empirical support for the above expectations and underscores the need for policy attention to mitigate such possible misconduct. The goals of ECF platform team members are unlikely to always align with what ECF investors want. More specifically, ECF platform team members can use private information and exploit rules meant to protect buyers online (i.e., the cooling-off period, which allows for investment withdrawals at no cost) to support the fundraising of firms with weaker prospects on their platform. Our research adds to the signaling literature by highlighting false signals conveyed by ECF platform team members and especially the upper echelon members. The paper further contributes to the misconduct literature in entrepreneurial finance, which has mostly focused on entrepreneur and/or investor misconduct, while we focused on possible misconduct by platform team members who are generally viewed as benign. It focuses on an underexplored agency problem in entrepreneurial finance between platforms and ECF investors. The paper also adds to the ECF literature by providing novel insights into post-campaign venture outcomes. Finally, the paper further contributes to the discussion about the need for better regulations in ECF markets. More transparent information and limiting the possibility of invest-and-withdraw tactics might help channel funds to the most promising ventures, ultimately providing added value for the economy and ensuring the long-term prospects of the ECF market. • Equity crowdfunding platform team members frequently use an invest-and-withdraw tactic. • Ventures in which platform team members invest exhibit weaker post-campaign outcomes. • When platform team members withdraw the investments (after attracting others) ventures show even weaker ex-post outcomes. • Investments by the platform’s upper echelons are highly negatively associated with weaker post-campaign venture outcomes. • New insights into the signaling literature, by revealing the occurrence of false signaling by platform team members.

How can communities be active to create and scale opportunities for sustainable small and local businesses? We address this question through a longitudinal study of a community-based initiative, which promoted sustainability in food production and consumption and has scaled to different communities worldwide. To improve our understanding of the entrepreneurial role of communities, we observed how communities proactively engaged in processes evolving from replicating and developing community ventures to scaling community movement over time. Through these processes, we identified three mechanisms— infrastructure shift , nurturing , and sustaining infrastructure . Our research extends current theories of community-based entrepreneurship by offering a process perspective at the community level and elaborating how communities collectively create and scale opportunities for sustainable small and local businesses, allowing an idea to evolve from a small initiative to a large movement.

This study offers novel insights into how team structure and flexibility affect pivoting. It details how founding team coordination practices shape individual and collective sensemaking of feedback and efforts to improve a venture idea. Following seven founding teams, we identified how teams with overlapping responsibilities enjoyed the flexibility of both fragmented and holistic sensemaking. This enabled them to pivot when needed but otherwise persevere with their venture idea. In contrast, teams with clear separation of responsibilities engaged in fragmented sensemaking and only persevered with their idea. Our findings advance research on founding team coordination, pivoting, and teams' understanding of their venture ideas. • Overlapping responsibilities allow teams to remain flexible. • Only teams with overlapping responsibilities use both structured and unstructured spaces to coordinate their sensemaking. • Fragmented and holistic sensemaking may result in different idea development outcomes. • Understandings of venture ideas may differ within founding teams at times. • Pivoting emerges from layering and recombining team members' different holistic understandings.