Session 224

Funding an Entrepreneurial Venture: What Works and What Does Not?

Track K

Date: Tuesday, September 23, 2014

 

Time: 08:00 – 09:15

Common Ground

Room: Moscu


Facilitator:

  • Sharon Matusik, University of Colorado, Boulder

Title: Black & White: Racial Differences in New Firm Financing

Authors

  • Alicia Robb, Ewing Marion Kauffman Foundation
  • Robert Fairlie, University of California, Santa Cruz
  • David Robinson, Duke University

Abstract: This paper uses panel data from the Kauffman Firm Survey to examine racial differences in amounts and sources of startup capital and follow on financing of new white- and black-owned firms during their early years of operations. Black-owned businesses rely much more on owner equity than do white-owned businesses indicating that black-owned businesses face more difficulty in raising external capital. Direct evidence on average levels of external capital reveals large racial disparities between blacks and whites. Regression analyses indicate that racial disparities in the amounts and types of early financing between blacks and whites do not entirely disappear after controlling for differences in credit quality, human capital, and firm characteristics. These unexplained differences indicate that discrimination in lending markets and in business ownership may continue to persist.

Title: Crowdfunding for Entrepreneurial Ventures: The Role of Entrepreneurial Teams’ Human and Social Capital

Authors

  • Evila Piva, Polytechnic University of Milan

Abstract: In this paper, I examine the effects of both the social and the human capital of the individuals who propose a business project and will lead it on the success of an equity-based crowdfunding campaign. After formulating theoretical hypotheses on the effects of the two types of capital, I test the hypotheses using a sample of 134 entrepreneurial projects posted on the Italian equity-based crowdfunding platform SiamoSoci.

Title: Does Entrepreneurs’ Passion Attract Funding or Backfire? The Moderating Role of Perspective Taking

Authors

  • Lin Jiang, University of Missouri
  • Dezhi Yin, University of Missouri
  • Richard Johnson, University of Missouri

Abstract: We examine how entrepreneurs’ passion affects their performance in raising funding from investors, a topic on which the literature has not yet reached a consensus. Drawing upon theories on interpersonal effect of emotions, we argue that whether passion displayed by entrepreneurs positively or negatively affects investors’ funding decisions depends on the level of social bond between the entrepreneurs and investors, and an entrepreneur can foster this social bond by taking the perspectives or standing in the shoes of potential investors. Our preliminary analysis of a random sample of 155 ventures listed on Kickstarter.com supports our hypothesis. The results suggest that passion may not always be the recipe for funding success and may even backfire, unless the entrepreneurs diligently take the perspective of potential investors.

Title: How do Venture Capitalists Affect New Ventures' Chances of Exit?

Authors

  • Roberto Ragozzino, University of Tennessee
  • Dane Blevins, Clemson University

Abstract: This paper investigates how venture capitalists' involvement in new ventures affects the likelihood of entrepreneurial exit, either via an acquisition or an initial public offering. We examine the prominence of VCs, as well as the timing, duration and magnitude of their investments in new ventures. We find that each of these dimensions directly explains entrepreneurial exit, although their effects tend to differ depending on whether the exit occurs via an acquisition or an IPO. These results withstand several robustness checks and offer a more precise account of how the relationship between new ventures and VC firms unfolds in the first years of the entrepreneurial cycle.

Title: Tangoing with Strangers or Friends: When Do VC Firms Syndicate with New Co-investors

Authors

  • Changqi Wu, Peking University
  • Lin Zhang, Peking University

Abstract: Instead of investing alone, venture capital (VC) firms tend to syndicate with each other. Compared with syndicating with co-investors that lie in the VC firm’s incumbent network, syndicating with a new co-investor can bring not only new information and knowledge, but transaction costs as well. So the paper tries to illustrate when VC firms syndicate with new co-investors. We propose that the likelihood of introducing new co-investors decreases with the increase of the focal VC firm’s network position and size. And such relationship conditions on the focal VC firm’s industry experience and the geographic distance between target venture and the focal VC firm.

Title: What’s in a Name? The Effect of Parent Firm Characteristics on Corporate Venture Capital Activity

Authors

  • Joseph Harrison, Texas A&M University

Abstract: Research on corporate venture capital (CVC) has primarily focused on environmental and startup characteristic driving investment activity, such as intellectual property protection and resource needs, but has mostly overlooked how characteristics of the corporate investor impact CVC activity. We examine various characteristics that may influence CVC investment by attracting or repelling entrepreneurial partners. We argue that network strength, functional experience, and strong firm reputation represent desirable strategic benefits to startups, attracting entrepreneurial partners. However, overlap in term of industry, investment, and patents as well as particular interorganizational structures and large firm size increase perceived misappropriation risk, repelling entrepreneurial partners. Further, because entrepreneurs balance risks and benefits when deciding to partner with a particular investor, these characteristics should interact for an overall effect on CVC activity.

All Sessions in Track K...

Sun: 08:00 – 09:15
Session 386: Entrepreneurial Corporate Governance
Sun: 09:30 – 10:45
Session 387: Social Capital in Emerging Markets: Local, Glocal or Global?
Sun: 11:15 – 12:30
Session 462: Crowdfunding: State of the Art and Directions for Future Research
Sun: 15:45 – 17:00
Session 235: Cognitive and Behaviorial Perspectives of Entrepreneurial Decision Making
Session 380: Small, Young and Entrepreneurial Firms: A Unique Perspective in Globalization
Sun: 17:15 – 18:30
Session 607: Entrepreneurship and Strategy IG Business Meeting
Mon: 08:00 – 09:15
Session 227: Entrepreneurial Orientation, capabilities and firm performance
Session 445: Adaptation issues for Entrepreneurial Firms
Mon: 11:00 – 12:15
Session 232: Theory Building in the Field of Entrepreneurship
Session 440: Entrepreneurial Strategies in Emerging and International markets
Mon: 14:45 – 16:00
Session 231: Entrepreneurial Leadership: What it Takes to be a Successful Enterprise?
Session 457: Ownership and Funding Structures: Performance Implications for the entrepreneurial firms
Mon: 16:30 – 17:45
Session 226: Culture, Norms and Institutions: The contextual influences on Entrepreneurship
Session 229: Who Founds and how the Founding Team Impacts the Entrepreneurial Firm?
Tue: 08:00 – 09:15
Session 224: Funding an Entrepreneurial Venture: What Works and What Does Not?
Session 236: Universities, Academics and Incubators: The Role of Academic Institutions in Shaping Entrepreneurial Firm and Outcomes
Tue: 11:00 – 12:15
Session 230: TMTs as Firm Resources
Session 309: New Conversations on Business Models
Tue: 15:30 – 16:45
Session 225: Entrepreneurial Networks: Formation and Implications
Session 228: Dynamic Capabilities and Performance Implications for New Firms
Tue: 17:15 – 18:30
Session 234: Institutional, Industry and Firm Specific Impacts on Nascent Firms
Session 441: Funding Entrepreneurial Ventures: Sources and Successes


Strategic Management Society

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