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Choosing Between Growth and Glory

Author

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  • Sharon Belenzon

    (Duke University, Durham, North Carolina 27708; National Bureau of Economic Research, Cambridge, Massachusetts 02138;)

  • Aaron K. Chatterji

    (Duke University, Durham, North Carolina 27708; National Bureau of Economic Research, Cambridge, Massachusetts 02138;)

  • Brendan Daley

    (University of Colorado Boulder, Boulder, Colorado 80309; Johns Hopkins University, Baltimore, Maryland 21211)

Abstract

Prior work has established that the financing environment can impact firm strategy. We argue that this influence can shape the earliest strategic choices of a new venture by creating a potential trade-off between two objectives: rapid growth and reaping the benefits of a positive reputation (glory). We leverage a simple reputation-building strategic choice—naming the firm after the founder (eponymy)—that is associated with superior profitability. Next, we argue via a formal model that the availability of/dependence on external financing can explain why high-growth firms are rarely eponymous. We find empirical support for the model’s predictions using a large data set of 1 million European firms. Eponymous firms grow considerably more slowly than similarly profitable firms. Moreover, eponymy varies in accordance with the firm’s financing environment in a pattern consistent with our model. We discuss implications for the literature on new-venture strategy.

Suggested Citation

  • Sharon Belenzon & Aaron K. Chatterji & Brendan Daley, 2020. "Choosing Between Growth and Glory," Management Science, INFORMS, vol. 66(5), pages 2050-2074, May.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:5:p:2050-2074
    DOI: 10.1287/mnsc.2019.3296
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    Cited by:

    1. Catherine Fazio & Jorge Guzman & Scott Stern, 2020. "The Impact of State-Level Research and Development Tax Credits on the Quantity and Quality of Entrepreneurship," Economic Development Quarterly, , vol. 34(2), pages 188-208, May.
    2. 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.
    3. Guzman, Jorge & Kacperczyk, Aleksandra (Olenka), 2019. "Gender gap in entrepreneurship," Research Policy, Elsevier, vol. 48(7), pages 1666-1680.
    4. Reddi Kotha & Balagopal (Bala) Vissa & Yimin Lin & Anne‐Valérie Corboz, 2023. "Do ambitious entrepreneurs benefit more from training?," Strategic Management Journal, Wiley Blackwell, vol. 44(2), pages 549-575, February.

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    More about this item

    Keywords

    new-venture strategy; entrepreneurship; firm growth; signalling; eponymy;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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