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When less is more: EO's influence upon funds raised by young technology firms at IPO

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  • Mousa, Fariss-Terry
  • Wales, William J.
  • Harper, Steven R.

Abstract

This study examines the influence of entrepreneurial orientation (EO) on the amount of capital raised by a young technology firm at the time of its initial public offering (IPO). We draw on signaling theory and an exploration–exploitation theoretical perspective to develop insights concerning the influence of EO upon IPO valuation. Results indicate a negative relationship between EO, as signaled within the firm prospectus, and IPO value. Moreover, top management team (TMT) external board activities are found to moderate the EO–IPO value relationship. With TMT external board activities, a more pronounced negative relationship is indicated. However, without TMT external board activities, stronger EO signals are found to positively impact the amount of funds raised at IPO. The implications of these findings are discussed.

Suggested Citation

  • Mousa, Fariss-Terry & Wales, William J. & Harper, Steven R., 2015. "When less is more: EO's influence upon funds raised by young technology firms at IPO," Journal of Business Research, Elsevier, vol. 68(2), pages 306-313.
    • Handle: RePEc:eee:jbrese:v:68:y:2015:i:2:p:306-313
    DOI: 10.1016/j.jbusres.2014.07.003
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    3. Chapman, Gary & Hottenrott, Hanna, 2023. "Founder personality and start-up subsidies," ZEW Discussion Papers 23-008, ZEW - Leibniz Centre for European Economic Research.
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    5. Julian Bafera & Simon Kleinert, 2023. "Signaling Theory in Entrepreneurship Research: A Systematic Review and Research Agenda," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2419-2464, November.
    6. Linton, Gabriel & Kask, Johan, 2017. "Configurations of entrepreneurial orientation and competitive strategy for high performance," Journal of Business Research, Elsevier, vol. 70(C), pages 168-176.
    7. Wales William & Cox Kevin C. & Lortie Jason & Sproul Curtis R., 2019. "Blowing Smoke? How Early-Stage Investors Interpret Hopeful Discourse within Entrepreneurially Oriented Business Plans," Entrepreneurship Research Journal, De Gruyter, vol. 9(3), pages 1-16, July.
    8. Wang, Taiyuan & Qureshi, Israr & Deeds, David & Ren, Yi, 2019. "How do technology ventures signal IPO quality? A configurational approach," Journal of Business Research, Elsevier, vol. 99(C), pages 105-114.
    9. Honjo, Yuji & Kwak, Charee & Uchida, Hirofumi, 2022. "Initial funding and founders’ human capital: An empirical analysis using multiple surveys for start-up firms," Japan and the World Economy, Elsevier, vol. 63(C).
    10. Guldiken, Orhun & Tupper, Christina & Nair, Anil & Yu, Huizhi, 2017. "The impact of media coverage on IPO stock performance," Journal of Business Research, Elsevier, vol. 72(C), pages 24-32.
    11. Vishal Gupta & Sandra C. Mortal & Tina Yang, 2018. "Entrepreneurial orientation and firm value: Does managerial discretion play a role?," Review of Managerial Science, Springer, vol. 12(1), pages 1-26, January.
    12. Atthaphon Mumi & Michael Obal & Yi Yang, 2019. "Investigating social media as a firm’s signaling strategy through an IPO," Small Business Economics, Springer, vol. 53(3), pages 631-645, October.
    13. Vishal K. Gupta & Suman Niranjan & Erik Markin, 2020. "Entrepreneurial orientation and firm performance: the mediating role of generative and acquisitive learning through customer relationships," Review of Managerial Science, Springer, vol. 14(5), pages 1123-1147, October.
    14. Vaznyte, Egle & Andries, Petra, 2019. "Entrepreneurial orientation and start-ups' external financing," Journal of Business Venturing, Elsevier, vol. 34(3), pages 439-458.

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