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Badge of honor or tolerable reality? How previous firm failure and experience influences investor perceptions

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  • Roccapriore, Ashley Y.
  • Imhof, Zoë
  • Cardon, Melissa S.

Abstract

Entrepreneurs face considerable obstacles in accruing funding and other resources when starting a new venture; problems that are likely compounded when starting a new venture after experiencing failure. In particular, it is unclear how early-stage investors react to entrepreneurs with prior failure experiences in terms of how they perceive the entrepreneur's capabilities and how they evaluate the new venture. Leveraging expectancy violation theory, we theorize that prior failure will lead to more negative outcomes than prior success, but more positive outcomes than those with no prior entrepreneurial experience, and that this effect will be further attenuated by whether the entrepreneur learned or not from their prior experience. We test our model using a scenario-based experiment of 828 decisions made by 69 early-stage investors. We contribute to the literature on early stage investor decision making, entrepreneurial failure and learning, and discuss implications and future research directions given our findings.

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  • Roccapriore, Ashley Y. & Imhof, Zoë & Cardon, Melissa S., 2021. "Badge of honor or tolerable reality? How previous firm failure and experience influences investor perceptions," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
  • Handle: RePEc:eee:jobuve:v:16:y:2021:i:c:s2352673421000305
    DOI: 10.1016/j.jbvi.2021.e00252
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    References listed on IDEAS

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    Cited by:

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    2. Kincaid, Paula A. & Short, Jeremy C. & Wolfe, Marcus T., 2022. "Got ink, get paid? Exploring the impact of tattoo visibility on crowdfunding performance," Journal of Business Venturing Insights, Elsevier, vol. 17(C).
    3. Waddingham, Jacob A. & Hamrick, Alexander B. & Zachary, Miles A., 2023. "Addressing the entrepreneur in the room: Entrepreneurial exit and impression management tactics in the employment interview context," Journal of Business Venturing Insights, Elsevier, vol. 19(C).

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