Who's behind the screen? Segmenting social venture consumers through social media usage

With the growing popularity of social media as a tool for marketing social causes and the increasing significance of social ventures in today's market economy, it is important to understand the heterogeneous nature of social venture consumers in regard to their social media usage. Using cluster analysis of survey responses from 305 consumers of various social ventures, four distinct segments of consumers who support social ventures were identified – social observers, active contributors, social connectors, and moderate contributors – based on three dimensions of social media site usage: creating content, connecting with others, and control over the user experience. Further analysis of survey results revealed that these four segments of consumers show significant differences in supporting behaviors     

The right touch of pitch assertiveness: Examining entrepreneurs' gender and project category fit in crowdfunding

Scholars have devoted significant attention to the role of entrepreneurs' communication, and gender in crowdfunding. Yet, how female and male entrepreneurs can effectively configure their assertive communication style and the role gender norms within project categories play in shaping crowdfunders' evaluations of entrepreneurs' communication style remains unanswered. To address this, we conduct an exploratory qualitative comparative case analysis (QCA) of 1600 entrepreneurs who pitched their ventures on Kickstarter. From prior research, we identified four distinct kinds of assertive language (certain, power, social, tentative) and explore how female and male entrepreneurs' configurations of assertive language relate to crowdfunding success and failure in male-dominated and female-dominated contexts. We found six pitch assertiveness themes, two associated with success, two associated with failure, and two where success versus failure depends on nuanced considerations of the entrepreneur's gender and the gendering of the context. Our study extends our understanding of communication and gender in crowdfunding.     

Family involvement and new venture debt financing

New ventures often require debt financing but face difficulties convincing lenders of their creditworthiness because of agency problems. Researchers have shown that social capital can help small firms reduce lenders' agency concerns but new ventures do not yet have their own social capital. We propose that family involvement increases a venture's ability to borrow family social capital for the purpose of obtaining debt financing. Empirical tests with 1267 new ventures suggest that family involvement directly and indirectly improves a new venture's access to debt financing.     

Exploring the multi-level processes of legitimacy in transnational social enterprises

Transnational entrepreneurship has emerged as a form of migrants' participation in the social, economic, and political lives of both their countries of origin and of residence. Leveraging increasing evidence about migrants' involvment in transnational social enterprises, we examine the multi-level processes through which organizational legitimacy is molded by transnational entrepreneurs to reflect country-level institutional settings, and how organizational-level legitimacy affects entrepreneurs' social status. We longitudinally examine the multi-level processes of legitimation in a transnational social enterprise operated by Ghanaian migrants across Italy and Ghana. We analyze secondary and ethnographic data for two years, observing how transnational social enterprises harvest moral and pragmatic legitimacy from the institutional contexts in which they operate. We study how entrepreneurs construe their social status through pragmatic legitimacy obtained from their transnational ventures, and their institutional environments inspired by micro- and meso legitimacy reconfigurations. We discuss theoretical implications for social and transnational entrepreneurship and practical contributions for policy-making.     

Is venture capital worth it? Effects on firm performance and founder returns

This paper extends research on venture capital (VC) finance by studying its effects on a venture's performance and on its founders' returns beyond an initial public offering (IPO). A “founder performance” construct, defined as a founder's financial and nonfinancial returns, is proposed and used to measure and compare returns to founders with returns to investors and firm performance. In general, venture characteristics pre-IPO and venture performance post-IPO were not significantly different when comparing ventures with and without VC backing. Only when VC backing is very high, do pre-IPO resources and funding improve significantly. However, higher levels of resource endowments did not seem to affect post-IPO performance for the venture or its investors. On the other hand, founders resorting to VC funding before taking their company public generated significantly less wealth for themselves and were less likely to remain as CEOs of their ventures after the IPO. Results suggest that founders motivated primarily by wealth creation and those motivated by remaining in control of their ventures should, in both instances, minimize VC backing when taking their ventures public. The finding that founder performance differs from venture and investor performance calls for future research to explore potential conflicts of interest that may arise from the double role of founders as principals and agents.     

Beyond social capital: the role of entrepreneurs' social competence in their financial success

Two studies investigated the hypothesis that the higher entrepreneurs' social competence (their ability to interact effectively with others as based on discrete social skills), the greater their financial success. Entrepreneurs working in two different industries (cosmetics and high-tech) completed a questionnaire designed to measure several aspects of their social competence (e.g., accuracy in perceiving others, skill at impression management, persuasiveness). Results indicated that one aspect of social competence (e.g., accuracy in perceiving others) was positively related to financial success for both groups of entrepreneurs. In addition, social adaptability was related to financial success for entrepreneurs in the cosmetics industry, and expressiveness was related to such success for the entrepreneurs in the high-tech industry. The questionnaire employed to assess social competence was cross-validated with a third group of entrepreneurs who completed this measure themselves, and whose social competence was also rated by persons who knew them well. The two sets of ratings agreed closely, thus providing evidence for the validity of this measure. Overall, findings are consistent with the view that a high level of social capital (e.g., a favorable reputation, extensive social network, etc.) assists entrepreneurs in gaining access to persons important for their success. Once such access is attained, however, entrepreneurs' social competence influences the outcomes they experience.     

Venture capitalists' decision criteria in new venture evaluation

What criteria do venture capitalists use to make venture investment decisions? The criteria venture capitalists use to make their venture investment decisions are of interest for several reasons. First, venture capitalists are conspicuously successful in their investment decisions. The success rate of venture capital-backed ventures is significantly higher than the success rate of new ventures generally (Dorsey 1979: Davis and Stetson 1984). A better understanding of the criteria used could lead to a better understanding of the reasons for this success.Second, a better understanding of the criteria for successful new ventures could lead to an improvement in the success rate of new ventures. Although there is no clear agreement on the precise rate, the failure rate among new ventures is generally viewed as significantly higher than the average failure rate (Dun and Bradstreet 1984; Van de Ven 1980; Shapero 1981).Finally, venture capitalists' investment criteria are of enormous import to entrepreneurs seeking venture funding. Such entrepreneurs require a significant infusion of capital in order to grow their businesses, and knowledge of the criteria sought by venture capitalists can aid entrepreneurs in gaining the necessary financing.This study attempts to uncover the criteria used by venture capitalists through semistructured interviews and verbal protocol analysis of venture capitalists' evaluations of actual venture proposals. Sixteen verbal protocols—in which the participants “think aloud” as they review business proposals— were made of venture capitalists' venture evaluation decisions.The findings of this study suggest that venture capitalists screen and assess business proposals very rapidly: the subjects in this study reached a GO/NO-GO decision in an average of less than six minutes on initial screening and less than 21 minutes on proposal assessment. In venture capitalists' initial proposal screening, key criteria identified include fit with the venture firm's lending guidelines and the long-term growth and profitability of the industry in which the proposed business will operate. In the second stage of proposal assessment, the source of the business proposal also played a major role in the venture capitalists' interest in the plan, with proposals previously reviewed by persons known and trusted by the venture capitalist receiving a high level of interest.In addition to the specific criteria identified and how they were used in reaching GO/NO-GO decisions, the findings of this study also were surprising for the lack of importance venture capitalists attached to the entrepreneur/entrepreneurial team and the strategy of the proposed venture during these early stages of the venture evaluation process.     

Consumer motivation for the decision to boycott: The social dilemma

This study suggests a rational framework to explain consumers’ decision to boycott. We proposed an instrumental boycott framework based on rational response to the offending behaviour of a target company. The hypotheses embedded within the research model are empirically evaluated. The data were collected by questionnaire survey, and structural equation modelling was utilized for data analysis. The results show that social factors (message credibility, expected overall participation and perceived boycott effectiveness) generate motivations for consumers’ boycott decisions. In addition, it is identified that these factors increase consumers’ perceived likelihood of boycott success. Further, it is also found that consumers' perceived likelihood of boycott success positively affect their boycott decision via the possibility of changing a target company's offending behavior and unwillingness to purchase the target company's products. The results of this study explain consumers’ instrumental boycott decision‐making process in terms of social dilemma. Further, this study provides practical contributions for understanding consumers’ rational boycott behaviour. Specific implications for marketing managers and boycott organizations are outlined in the general discussion. Suggestions for future research are also presented in the conclusion.     

Creating sustainable international social ventures

International social ventures are now an increasingly common feature of the international business and social landscape in many countries worldwide. However, despite the increase in the number of social ventures and widespread interest that has resulted, theoretical development that deals specifically with international social ventures, or social ventures that operate across borders, has lagged behind, and there is little to guide potential social entrepreneurs thinking of setting up an international social venture. The aim of this article is to show how combining concepts from social exchange theory with international new venture theory can provide a useful conceptual framework that helps answer the central questions: What are the conditions for sustainable international social ventures? What difficulties are likely to arise in establishing such ventures? © 2012 Wiley Periodicals, Inc.     

Technology strategy and software new ventures' performance: Exploring the moderating effect of the competitive environment

Technology strategy (TS) is one of the most important aspects of any firm's strategic posture especially in dynamic environments such as the computer software industry. Not only do new ventures face the pressures that accompany all young companies (e.g., shortages of capital), but they also have to keep up with a rapid rate of technological change. Consequently TS, the sum of a firm's choices on how to develop and exploit its technological resources, can profoundly affect a venture's performance and survival.This empirical study examines the relationships between TS and new venture performance (NVP). By focusing on TS variables and analyzing their performance outcomes, the study offers insights into the factors that can influence the success of new ventures in a fast-paced environment. This study also examines key environmental moderators, those external environmental forces, which can significantly impact the strength or direction of the relationship between a firm's TS and NVP.The study examines five TSs that can enhance NPV. The first is radicality, which means developing and introducing new products ahead of competitors. The second is the intensity of product upgrades, which refers to a venture's commitment to introducing more refinements and extensions of its products than its competition. The third is the level of R&D spending, which indicates a venture's strong investment in internal research and development activities. The fourth is the use of external technology sources (e.g., strategic alliances and licenses) to augment a firm's own R&D efforts. The final dimension is the use of     

Home country institutions,social value orientation,and the internationalization of ventures

We examined how home country formal institutions and the venture’s value orientation influenced the venture’s likelihood of internationalization based on a data set that was adapted from the Global Entrepreneurship Monitor (GEM) data in the year 2009, covering 7668 individual ventures in 25 countries. Better-developed home country formal institutions are found to have a supportive impact on the venture’s likelihood of internationalization. The supportive impact is also found to be weaker for socially oriented ventures than for profit-oriented ventures. The venture’s social value orientation negatively moderates the home country formal institutions–likelihood of internationalization relationship. The negative moderating effects can be explained as follows: Socially oriented ventures in the better-developed home country institutional environment are less likely to develop coping skills against uncertain and risky institutional environments, which are common in their host countries. Besides the theoretical contributions, this paper also highlights the implications for both business researchers and policy makers.     

Technology strategy and new venture performance: A study of corporate-sponsored and independent biotechnology ventures

New ventures, companies eight years or younger, play a major role in the development of an emerging, high-technology industry. Corporate-sponsored new ventures (those supported by an established corporation) and independent ventures (those founded by independent entrepreneurs) frequently battle for industry leadership and financial success. Whereas both venture types use technology to achieve financial and market success, little is known about the differences in their technology strategies.Technology strategy is the plan that guides a new venture's decisions on the development and use of technological capabilities. This strategy covers six major areas. The first is selecting the pioneering posture, where a venture decides whether or not be among the industry's first companies to introduce new products (technologies) to the market. The second is determining the number of products to be introduced to the market. The third is choosing the extent of a venture's use of internal and external R&D sources. Internal sources usually refer to in-house R&D activities. External sources may include purchasing or licensing of technology from other companies, or joining strategic alliances to acquire that technology. The fourth is deciding the level of R&D spending. The fifth is selecting the combination (portfolio) of applied and basic research projects. Whereas basic R&D advances science, applied R&D leads to new products and technologies. The sixth, and final, dimension is the venture's use of patenting to protect any competitive advantages it might gain from its R&D activities.This article reports the results of a study that explored the differences in the technology strategies and performance of corporate and independent ventures. The biotechnology industry was chosen to test the study's hypotheses, using 112 ventures.Seven of the study's hypotheses focused on the potential variations in technology strategy between corporate and independent ventures. Independent ventures (IVs) were expected to surpass corporate ventures (CVs) in pioneering new products (technologies), using internal R&D, and emphasizing applied R&D. CVs were expected to surpass IVs in introducing new products, using external R&D sources, spending on R&D, and patenting. The study's remaining three hypotheses covered possible variations in new venture performance (NVP) and their sources.The results showed that IVs focused more on pioneering, pursued a more applied R&D portfolio, and emphasized internal R&D more than CVs. CVs utilized external technology sources, spent more heavily on R&D, stressed basic R&D, and used patenting more intensively than IVs. These results were consistent with the hypotheses. However, contrary to expectations, there were no significant differences between CVs and IVs in the frequency of new product introductions, probably because most ventures were at the invention, rather than the commercialization, stage.The results on the NVP of CVs and IVs were counter to expectations. IVs outperformed CVs, probably because of the high motivation of the IV owners who reaped the rewards of growth and profitability. Also, whereas CVs may have greater access to the resources of their sponsors, political conflicts and rigid corporate controls might have reduced their ability to achieve competitive advantages.The results also indicated that CVs and IVs appeared to gain competitive advantages from different technological choices. Pioneering, a focus on applied R&D, and extensive use of the internal R&D sources were also positively associated with the performance of IVs. Heavy R&D spending, the use of both internal and external R&D sources, frequent product introductions, and patenting were positively associated with the performance of CVs. Finding that technology strategies significantly impacted NVP should encourage executives to consider pursuing a formal technology strategy. Likewise, the finding that different dimensions of technology strategy influenced the performance of CVs and IVs in different ways has practical implications. CV managers can learn from their higher performing IV rivals. Also, because established companies frequently acquire IVs, information about their technology strategies can be valuable in assimilating the acquired ventures. Overall, the results show that technology strategy is an important factor in enhancing new venture performance.     

Fan-centric social media: The Xiaomi phenomenon in China

In this highly competitive century, social media offers both opportunities and challenges. The concept of social media is top of mind for many entrepreneurs today. Fans are assuming an increasingly active role in co-creating marketing content with companies and their respective brands. Based on the Xiaomi success story in China, we provide a framework for building the power of the fan base and propose a new fan-centric social media business model. We examine the best practice case study of an emerging company's successful efforts to leverage social media in order to reach an important audience of young consumers. Thereafter, we conclude with several lessons related to the integration of social media into a new firm's operation strategy. We strongly recommend that businesses, and especially startups, make good use of powerful social media to develop a business model with fan demand as the core. This is what we call the ‘fan-centric’ social media business model.     

Rags to riches? Entrepreneurs' social classes,resourceful time allocation,and venture performance

Social classes shape entrepreneurial pursuits in that entrepreneurs from lower social class groups face more resource deficiencies compared to those from higher social class groups. In this study, we theorize that being resourceful with a particular resource—time—helps ventures run by lower-class entrepreneurs achieve better performance. However, we further argue that the extent to which entrepreneurs use time resourcefully is affected by the cognitive schemas stamped on them by their social class backgrounds. Our empirical analysis of 8663 Chinese private entrepreneurs between 2006 and 2010 lends robust support to these arguments. By revealing both material and cognitive constraints stemming from entrepreneurs' social classes, our study contributes to research on social classes and entrepreneurial resourcefulness and has important implications for understanding the persistence of inequality in entrepreneurship.     

Tweeting like Elon? Provocative language,new-venture status,and audience engagement on social media

This article theorizes and empirically investigates how status and provocative language influence audience engagement with new-venture posts on social media platforms. Using venture capital funding as a status proxy, we analyzed 369,142 Twitter posts by 268 new ventures. We found that status (1) increases engagement with ventures' tweets, and that it (2) moderates the effect of provocative language on audience engagement so that provocative language has a negative effect for low-status ventures but a positive effect for high-status ventures. Post-hoc analyses provide a basis for pragmatic theorizing and explore the effects of status tiers and subdimensions of provocative language.     

The potential of actuarial decision models: Can they improve the venture capital investment decision?

Venture capitalists (VCs) are considered experts in identifying high-potential new ventures—gazelles. VC-backed ventures survive at a much higher rate than those ventures backed by other sources Kunkel and Hofer 1991, Sandberg 1986, Timmons 1994. Thus, the VC decision process has received tremendous attention within the entrepreneurship literature. Nonetheless, VC-backed firms still fail at a surprisingly high rate (20%). Moreover, another 20% of the VC's portfolio fails to provide any return to the VC. Therefore, there is room for improvement in the VC investment process.The three staged investment process often begins with venture screening. First, VCs screen the hundreds of proposals they receive to assess which deserve further consideration. Those ventures that survive the initial stage are then subjected to extensive due diligence. Finally, the VC and entrepreneur negotiate terms of the investment. Considering the amount of time that due diligence and negotiation of terms may take, it is imperative that VCs minimize their efforts during screening so that only those ventures with the most potential proceed to the next stage. Yet, at the same time, the screening process should also be careful not to eliminate gazelles prematurely. VCs are in a quandary. How can they efficiently screen venture proposals without unduly rejecting high potential investments? The answer may be to use actuarial decision aides to assist in the screening process.Actuarial decision aides are models that decompose a decision into component parts (or cues) and recombine those cues to predict the potential outcome. For example, an actuarial model about the VC decision might decompose a venture proposal into decisions about the entrepreneurial team, the product, the market, etc. The sub-component decisions are than recombined to reach an overall assessment of the venture's potential. Such models have been developed in a number of decision domains (e.g., bank lending, psychological evaluations, etc.) and been found to be very robust. Specifically, these models often outperform the very experts that they are meant to mimic.The current study had 53 practicing VCs participate in a policy capturing experiment. The participants examined 50 ventures and judged each venture's success potential; would the venture ultimately succeed or fail. Likewise, identical information about each venture was input into two different types of actuarial models. One actuarial model—a bootstrap model—used information factors that VCs had identified as being most important to making a good investment decision. The second actuarial model was derived by Roure and Keeley (1990). The Roure and Keeley model best distinguished between success and failure in a study of 36 high-technology ventures. The bootstrap model outperformed all but one participating VC (he achieved the same accuracy rate as the bootstrap model). The Roure and Keely model, although less successful than the bootstrap model, outperformed over half of the participating VCs.The implications of this study are that properly developed actuarial models may be successful screening decision aides. The success of the actuarial models may be attributed to their consistency across different proposals and time. The models always weight the information cues the same. VCs, as are all human decision makers, may often be biased by differing salient information cues that cause them to misinterpret or ignore other important cues. For example, a VC may overlook product weaknesses if (s)he is familiar with the entrepreneur putting forth a particular proposal. Although the current study developed a generalized actuarial model, each VC firm could create screening models that fit it's particular decision criteria. The models could then be used by junior associates or lower level employees to perform an initial screen of received venture proposals thereby freeing senior associates' time.     

Beyond environmental scarcity: Human and social capital as driving forces of bootstrapping activities

Although entrepreneurship scholars highlight bootstrapping as a key resource acquisition approach to respond to the inherent resource constraints that nascent ventures face, little is known about what causes nascent ventures to engage in bootstrapping. Theory highlights the environment as an important determinant of bootstrapping activity. Analyzing bootstrapping behavior of 298 nascent ventures, we find that beyond perceived environmental factors, individual characteristics of the nascent entrepreneurs and factors relating to the embeddedness of the entrepreneurs in the environment determine their venture's bootstrapping behavior. In a more fine-grained analysis we gain insights into how these antecedents shape the use of particular bootstrapping strategies. Findings contribute to our understanding of factors driving resource management approaches in nascent ventures.     

The evaluative legitimacy of social entrepreneurship in capitalist welfare systems

Social entrepreneurs start ventures to tackle social problems, and these ventures have the potential to outperform other social service providers in welfare states. We leverage theories of legitimacy and Varieties of Capitalism to examine national experts’ (N = 361) assessments of the efficiency of social enterprises relative to state and civil society. Our multilevel analysis across 11 welfare states shows that social enterprises are perceived as a more efficient solution to social problems when a liberal or socialist logic dominates a given state’s market coordination and social welfare provision. However, when institutional logics are in conflict, the assigned legitimacy of social entrepreneurship is diminished.     

Cognitive biases,risk perception,and venture formation: How individuals decide to start companies

Despite the high risk involved, thousands of individuals decide to start ventures. Past research, however, has found that entrepreneurs do not have a high-risk propensity, that is, a great willingness to knowingly take risks. This study, therefore, explores how individuals cope with the risks inherent in their decisions, and suggests that entrepreneurs may not perceive the riskiness of starting ventures.The study's findings suggest that risk perceptions may differ because certain types of cognitive biases lead individuals to perceive less risk. Cognitive biases are common types of mental shortcuts used to make judgments. This study examines three cognitive biases that previous research has suggested may lower risk perception. The first, overconfidence, refers to the failure to know the limits of one's knowledge. The second bias tested, the illusion of control, occurs when individuals overemphasize the extent to which their skill can increase performance in situations where chance plays a large part and skill is not necessarily the deciding factor. Because the individuals believe that they can control largely uncontrollable events, they also think they can accurately predict the outcome of the events. Finally, the third bias, the belief in the law of small numbers occurs when an individual uses a limited number of informational inputs (a small sample of information) to draw firm conclusions.This study's sample consisted of 191 students pursuing a Masters of Business Administration. The students' responses to a survey based on a case study regarding a decision to start a venture were examined. The survey included questions about the students' willingness to start the venture, their perception of the venture's riskiness, and the extent to which they exhibited cognitive biases in their decision processes.The study's findings tentatively suggest that individuals start ventures because they do not perceive the risks involved, and not because they knowingly accept high levels of risks. The belief in the law of small numbers lowered an individual's perceptions of a venture's riskiness, suggesting that some individuals draw firm conclusions from small samples. An illusion of control also decreased risk perception, suggesting that individuals starting ventures might not acknowledge that certain tasks, important to the venture's success, are beyond their control.Some argue that biases might be associated with venture failure. If this is the case, the very processes that increase the likelihood of starting a venture may actually decrease performance. Entrepreneurs may choose to minimize their biases by soliciting and paying heed to the advice of outsiders, or by using group decision-making techniques, such as devil's advocacy or dialectical inquiry.Others, however, suggest that early in the decision process, biases may be beneficial because they lower risk perception, which allows entrepreneurs to generate the commitment needed for success. Even if this is true, entrepreneurs should still institute processes to increase learning so the venture can adjust to unfolding realities and avoid any damage caused by initial misperceptions. Similarly, entrepreneurs need adequate safety nets in case their biases lead them to encounter unforeseen difficulties. The potential positive and negative effects of biases and perceiving low levels of risk suggest the importance of exploring this area further.     

Born globals,the choice of globalization strategy,and the market's perception of performance

This paper analyzes which characteristics of born global firms determine their choice for international entry mode. Using a logistic regression analysis, we study 124 newly public firms in the United States that undertake 261 international joint ventures or international acquisitions within the first 6 years of their founding. We find that the market responds positively to announcements of international expansions by born global firms, and that larger, more profitable, and more liquid firms have a higher propensity to engage in joint ventures rather than acquisitions. We also find that the market favors firms that announce joint ventures, rewarding them with significantly positive abnormal returns. Furthermore, while we find that cultural similarity affects mode choice, it does not affect the market's reaction to the announcements.