Specialists, Generalists, or Both? Founders’ Multidimensional Breadth of Experience and Entrepreneurial Ventures’ Fundraising at IPO
Journal
Organization Science
ISSN
1047-7039
Type
journal article
Date Issued
2023
Author(s)
Abstract (De)
Different streams of research have led to contradictory conclusions about the venture performance implications of founders’ breadth of experience. While extant empirical studies have explored the performance implications of founders’ breadth of experience at the start-up stage, we focus on the later stage of the initial public offering (IPO). We theorize that investors categorize venture founders based on two salient dimensions—their industry and functional background—and we relate this categorization to resource acquisition at IPO. To test our model, we use a hand-collected dataset of 175 entrepreneurial IPOs in the Alternative Investment Market in London (2002–2013) and two randomized experiments. We theorize and find that compared to entrepreneurial ventures with a lead founder specializing in one industry or one function, investors generally devalue those with a category-spanning lead founder (a generalist). However, devaluation is less severe when a lead founder is a generalist in one dimension (e.g., industry) but a specialist in the other dimension (e.g., function). We also theorize and empirically test trust as a mechanism for the generalist penalty. Specifically, audience members (investors) have low trust in a generalist producer (founder) in contexts where the two parties consider entering into a partnership (equity investment at IPO), and so that generalist producer is devalued. Finally, we show that an external expert endorsement—in our case, from intensive venture capital affiliations—offsets the generalist penalty, especially when category spanning occurs in multiple category dimensions.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
Global Center for Entrepreneurship + Innovation
Refereed
Yes
Publisher
Informs
Volume
34
Number
2
Start page
557
End page
588
Subject(s)
Eprints ID
268103
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Specialists generalists or both final for the web.pdf
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Format
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