Abstract
This study examines how written expressions of entrepreneurial orientation (EO) and hope may affect investor evaluations of funding potential in business plan competitions. To understand why some firms are evaluated more favorably, we combine screening and signaling theory when analyzing early-stage venture-investor communication. Findings support that expressions of EO while business planning contribute to greater expressions of hope to cope with the Knightian uncertainty when developing new business models. Results suggest that the impact of hopeful dialogue on investor impressions of fundability critically depends upon the presence or absence of past founder financial investment. Implications for future research are discussed.
Appendix
A Study Measures
| Entrepreneurial Orientation (McKenny et al. in press) | |
| Innovativeness: | “ad lib, adroit, adroitness, bright idea, clever, cleverness, conceive, concoct, concoction, concoctive, conjure up, creative, creativity, develop, developed, dream, dream up, expert, formulation, freethinker, genesis, genius, gifted, hit upon, imagination, imaginative, improvise, ingenious, ingenuity, innovate, innovated, innovates, innovating, innovation, innovations, innovative, innovativeness, introduced, introducing, introduction, introductions, invent, invented, invention, inventive, inventiveness, inventor, launch, launched, launching, master stroke, mastermind, metamorphose, metamorphosis, neoteric, neoterism, neoterize, new capabilities, new capability, new compounds, new content, new core areas, new course, new directions, new family, new features, new generation, new generations, new idea, new ideas, new line of business, new medicine, new medicines, new molecular entities, new pharmaceuticals, new platform, new process, new processes, new product, new products, new solutions, new systems, new technique, new techniques, new technologies, new technology, new therapies, new thinking, new tools, new treatments, new ways, new wrinkle, new-generation, new-product, next generation, next-generation, novation, novel, novelty, patent, patented, patents, process development, product development, product launch, product launches, proprietary, prototype, prototyping, push the envelope, R&D, radical, re-engineering, reformulated, refreshed, reinvent, re-invent, reinvented, reinventing, reinvention, reinvents, released, renewal, renewing, research, reshape, reshaped, reshapes, reshaping, resourceful, resourcefulness, restyle, restyling, revolutionary, revolutionize, revolutionized, roll out, rolled out, see things, technologically advanced, think up, trademark, transform, transformation, transformed, transforming, visualize” |
| Proactiveness: | “anticipated, anticipation, anticipation, capitalize, capitalized, capitalizes, capitalizing, exploratory, explore, foreglimpse, foreknow, foresee, foretell, formulate, formulates, formulating, foundation, impatient, industry’s first, initiative, initiatives, inquire, inquiry, investigate, investigation, lead, looking ahead, move ahead, opportunistic, opportunities, opportunity, pave the way, pioneer, pioneered, pioneering, pioneers, plan, poised, positioned, positioning, positions, preparations, prepare, preparing, proactive, prospect, prospects, roadmap, scrutinization, take advantage, well-poised, well-positioned” |
| Risk taking: | “adventuresome, adventurous, audacious, bold, bold-spirited, brash, brave, chancy, courageous, danger, dangerous, dare, daredevil, daring, dauntless, dicey, fearless, gutsy, headlong, incautious, intrepid, plunge, precarious, rash, reckless, risky, temerity, venturesome, wager, hardship, hardships, no place to hide, no safe path, ambitious, ambitiousness, mega-ambitious, not for the faint-hearted, jeopardy, riskiest, risk taking, risk-taking, challenging ourselves, challenged ourselves, challenge ourselves” |
| Organizational Hope (McKenny, Short, and Payne 2013) | |
| “accomplishments, achievements, approach, aspiration, aspire, aspired, aspirer, aspires, aspiring, aspiringly, assurance, assurances, assure, assured, assuredly, assuredness, assuring, assuringly, assuringness, belief, believe, believed, believes, believing, breakthrough, certain, certainly, certainty, committed, concept, confidence, confident, confidently, convinced, dare say, deduce, deduced, deduces, deducing, desire, desired, desires, desiring, doubt not, energy, engage, engagement, expectancy, faith, foresaw, foresee, foreseeing, foreseen, foresees, goal, goals, hearten, heartened, heartening, hearteningly, heartens, hope, hoped, hopeful, hopefully, hopefulness, hoper, hopes, hoping, idea, ongoing, opportunity, promise, promising, propitious, propitiously, propitiousness, solution, solutions, upbeat, wishes, wishing, yearn, yearn for, yearning, yearning for, yearns for” | |
| Investor Evaluations of Business Plan | |
| (1) The team can effectively develop this company and handle the challenges associated with the venture. If the management team does not have any required skill or experience, a credible plan has been provided to access it, e. g. via an advisory board. (2) There is a clear definition of the product/service offered and the market need to be served, as well as a way to take advantage of that market need. The target customer and market size are well defined and quantified. The market shows high potential. (3) The competing products/services and their marketers are analyzed well. The company provides something novel/unique/special that gives it a competitive advantage in its target market. Its plan to develop and commercialize their product/service is clearly described and is credible. (4) The team has a solid understanding of the financial requirements of the business. The bases for revenues, expenses, capital expenditure projections (if applicable), as well as external funding requirements, are clearly described and are credible. (5) The business plan describes any major business or technology risks that are foreseen, as well as contingency plans to overcome them. The milestones for measuring success at different stages of implementing the business plan for the venture are clear and credible. (6) Investment Profile: The venture’s profitability, risk and return on investment profile are attractive. The business represents a real investment opportunity complete with milestones at the different stages of product/concept development in which you would consider investing. | |
References
Argerich, J., E. Hormiga, and J. Valls-Pasola. 2013. “Financial Services Support for Entrepreneurial Projects: Key Issues in the Business Angels Investment Decision Process.” The Service Industries Journal 33 (9): 806–19.10.1080/02642069.2013.719891Search in Google Scholar
Atherton, A. 2012. “Cases of Start-Up Financing: An Analysis of New Venture Capitalisation Structures and Patterns.” International Journal of Entrepreneurial Behavior & Research 18 (1): 28–47.10.1108/13552551211201367Search in Google Scholar
Avey, J., F. Luthans, K. Mhatre, and R. Reichard. 2011. “Meta-Analysis of the Impact of Positive Psychological Capital on Employee Attitudes, Behaviors, and Performance.” Human Resource Development Quarterly 22 (2): 127–52.10.1002/hrdq.20070Search in Google Scholar
Bergh, D. D., B. L. Connelly, D. J. Ketchen, and L. M. Shannon. 2014. “Signalling Theory and Equilibrium in Strategic Management Research: An Assessment and a Research Agenda.” Journal Of Management Studies 51 (8): 1334–60.10.1111/joms.12097Search in Google Scholar
Blank, S. 2013. “Why the Lean Start-Up Changes Everything.” Harvard Business Review 91 (5): 63–72.Search in Google Scholar
Bloch, E., and N. Plaice. 1986. The principle of hope, vol. 3, 1938–47. Cambridge, MA: MIT Press.Search in Google Scholar
Bovens, L. 1999. “The Value of Hope.” Philosophy and Phenomenological Research 59 (3): 667–81.10.1007/978-0-230-20409-6_8Search in Google Scholar
Brush, C., L. Edelman, and T. Manolova. 2012. “Ready for Funding? Entrepreneurial Ventures in the Pursuit of Angel Financing.” Venture Capital: an International Journal of Entrepreneurial Finance 14 (2–3): 111–29.10.1080/13691066.2012.654604Search in Google Scholar
Busenitz, L. W., J. O. Fiet, and D. D. Moesel. 2005. “Signaling in Venture Capitalist–New Venture Team Funding Decisions: Does It Indicate Long-Term Venture Outcomes?” Entrepreneurship Theory and Practice 29 (1): 1.10.1111/j.1540-6520.2005.00066.xSearch in Google Scholar
Cardon, M. S., C. Mitteness, and R. Sudek. 2016. “Motivational Cues and Angel Investing: Interactions among Enthusiasm, Preparedness, and Commitment.” Entrepreneurship Theory and Practice 27 (5): 592–606.10.1111/etap.12255Search in Google Scholar
Carlsen, A., A. Landsverk Hagen, and T. F. Mortensen. 2012. “Imagining Hope in Organizations: From Individual Goal-Attainment to Horizons of Relational Possibility,” in The Oxford Handbook of Positive Organizational Scholarship, edited by K. Cameron, and G. Spreitzer, 288–303. Oxford/New York: Oxford University Press10.1093/oxfordhb/9780199734610.013.0022Search in Google Scholar
Certo, S. T. 2003. “Influencing Initial Public Offering Investors with Prestige: Signaling with Board Structures.” Academy of Management Review 28 (3): 432–46.10.5465/amr.2003.10196754Search in Google Scholar
Chan, C. R., and H. D. Park. 2015. “How Images and Color in Business Plans Influence Venture Investment Screening Decisions.” Journal of Business Venturing 30 (5): 732–48.10.1016/j.jbusvent.2014.12.002Search in Google Scholar
Chan, D. 1998. “Functional Relations among Constructs in the Same Content Domain at Different Levels of Analysis: A Typology of Composition Models.” Journal of Applied Psychology 83 (2): 234.10.1037/0021-9010.83.2.234Search in Google Scholar
Chen, X., S. Kotha, and X. Yao. 2009. “Entrepreneur Passion and Preparedness in Business Plan Presentational: A Persuasion Analysis of Venture Capitalists Funding Decisions.” Academy of Management Journal 52 (1): 199–214.10.5465/amj.2009.36462018Search in Google Scholar
Connelly, B. L., S. T. Certo, R. D. Ireland, and C. R. Reutzel. 2011. “Signaling Theory: A Review and Assessment.” Journal of Management 37 (1): 39–67.10.1177/0149206310388419Search in Google Scholar
Cox, K., and J. Lortie (2015). “Entrepreneurial Orientation, Management Capabilities, and the Funding Potential of Early Stage Ventures.” Academy of Management Conference Proceedings, Vancouver.10.5465/ambpp.2015.15209abstractSearch in Google Scholar
Cox, K., J. Lortie, and K. Gramm. 2016. “The Investment Paradox: Why Attractive New Ventures Exhibit Relatively Poor Investment Potential.” Venture Capital 19 (3): 1–19.10.1080/13691066.2016.1247982Search in Google Scholar
Cox, K., and C. Sproul. 2015. “Crafting a Winning Business Plan: Opportunities, Capabilities, and Resources.” Southern Management Association Conference Proceedings, St Pete.Search in Google Scholar
Davila, A., G. Foster, and M. Gupta. 2003. “Venture Capital Financing and the Growth of Startup Firms.” Journal of Business Venturing 18 (6): 689–708.10.1016/S0883-9026(02)00127-1Search in Google Scholar
Deb, Palash, and Johan Wiklund. 2017. “The Effects of Ceo Founder Status and Stock Ownership on Entrepreneurial Orientation in Small Firms.” Journal of Small Business Management 55 (1): 32–55.10.1111/jsbm.12231Search in Google Scholar
DeTienne, D. R., J. O. De Castro, and D. A. Shepherd. 2008. “The Fallacy of ‘Only the Strong Survive’: The Effects of Extrinsic Motivation on the Persistence Decisions for Under-Performing Firms.” Journal of Business Venturing 23 (5): 528–46.10.1016/j.jbusvent.2007.09.004Search in Google Scholar
Eggers, Fabian, Isabella Hatak, Sascha Kraus, and Thomas Niemand. 2017. “Technologies that Support Marketing and Market Development in Smes-Evidence from Social Networks.” Journal of Small Business Management 55 (2): 270–302.10.1111/jsbm.12313Search in Google Scholar
Freear, J., J. E. Sohl, and W. E. Wetzel Jr. 1995. “Angels: Personal Investors in the Venture Capital Market.” Entrepreneurship & Regional Development 7 (1): 85–94.10.1080/08985629500000005Search in Google Scholar
Frid, C. J., D. M. Wyman, and W. B. Gartner. 2015. “The Influence of Financial’skin in the Game’on New Venture Creation.” Academy of Entrepreneurship Journal 21 (2): 1.Search in Google Scholar
Gomulya, David, and Yuri Mishina. 2017. “Signaler credibility, signal susceptibility, and relative reliance on signals: How stakeholders change their evaluative processes after violation of expectations and rehabilitative efforts.” Academy of Management Journal 60 (2): 554–583.10.5465/amj.2014.1041Search in Google Scholar
Haines, G., J. Madill, and A. Riding. 2003. “Informal Investment in Canada: Financing Small Business Growth.” Journal of Small Business & Entrepreneurship 16 (3–4): 13–40.10.1080/08276331.2003.10593306Search in Google Scholar
Harrison, R. T., C. Mason, and D. Smith. 2015. “Heuristics, Learning and the Business Angel Investment Decision-Making Process.” Entrepreneurship & Regional Development 27 (9–10): 527–54.10.1080/08985626.2015.1066875Search in Google Scholar
Hmieleski, K., and J. Carr. 2008. “The Relationship between Entrepreneur Psychological Capital and New Venture Performance.” Frontiers of Entrepreneurship Research 28 (4): 482–96.Search in Google Scholar
Holaday, J. W., S. L. Meltzer, and J. T. McCormick. 2003. “Strategies for Attracting Angel Investors.” Journal of Commercial Biotechnology 9 (2): 129–33.10.1057/palgrave.jcb.3040018Search in Google Scholar
Kirsch, D., A. Gera, and B. Goldfarb. 2009. “Form or Substance: The Role of Business Plans in Venture Capital Decision Making.” Strategic Management Journal 30 (5): 487–515.10.1002/smj.751Search in Google Scholar
Kline, R. B. 2011. Principles and Practice of Structural Equation Modeling, 3rd ed. New York, NY: The Guilford Press.Search in Google Scholar
Knight, F. H. 1921. “The Place of Profit and Uncertainty in Economic Theory,” in Risk, Uncertainty and Profit, 3– 21. The Library of Economics and LibertySearch in Google Scholar
Ludema, J. D., T. B. Wilmot, and S. Srivastva. 1997. “Organizational Hope: Reaffirming the Constructive Task of Social and Organizational Inquiry.” Human Relations 50 (8): 1015–52.10.1177/001872679705000809Search in Google Scholar
Luthans, F., B. Avolio, and S. Norman. 2007. “Positive Psychological Capital: Measurement and the Relationship with Performance and Satisfaction.” Personnel Psychology 60 (3): 541–72.10.1111/j.1744-6570.2007.00083.xSearch in Google Scholar
Macquarrie, J. 1978. Christian Hope. San Francisco: Harper.Search in Google Scholar
Mason, C., and R. Harrison. 1996. “Why’business Angels’ Say No: A Case Study of Opportunities Rejected by an Informal Investor Syndicate.” International Small Business Journal 14 (2): 35–51.10.1177/0266242696142003Search in Google Scholar
Mason, C., and M. Stark. 2004. “What Do Investors Look for in A Business Plan? A Comparison of the Investment Criteria of Bankers, Venture Capitalists and Business Angels.” International Small Business Journal 22 (3): 227–48.10.1177/0266242604042377Search in Google Scholar
Mason, C. M., and R. T. Harrison. 2002. “Barriers to Investment in the Informal Venture Capital Sector.” Entrepreneurship And Regional Development 14 (3): 271–87.10.1080/08985620210142011Search in Google Scholar
Maxwell, A., S. Jeffrey, and M. Levesque. 2011. “Business Angel Early Stage Decision Making.” Journal of Business Venturing 26 (2): 212–25.10.1016/j.jbusvent.2009.09.002Search in Google Scholar
McKenny, A., J. Short, and G. Payne. 2013. “Using Computer-Aided Text Analysis to Elevate Constructs and Illustration Using Psychological Capital.” Organizational Research Methods 16 (1): 152–84.10.1177/1094428112459910Search in Google Scholar
McKenny, A. F., H. Aguinis, A. H. Anglin, and J. C. Short. In press. “What Doesn’t Get Measured Does Exist Improving the Accuracy of Computer-Aided Text Analysis.” Journal of Management 20 (1): 1–25.10.1177/0149206316657594Search in Google Scholar
Miller, D. 2011. “Miller (1983) Revisited: ‘A Reflection on EO Research and Some Suggestions for the Future’.” Entrepreneurship Theory and Practice 35 (5): 873–94.10.1111/j.1540-6520.2011.00457.xSearch in Google Scholar
Mitteness, C., R. Sudek, and M. S. Cardon. 2012. “Angel Investor Characteristics that Determine whether Perceived Passion Leads to Higher Evaluations of Funding Potential.” Journal of Business Venturing 27 (5): 592–606.10.1016/j.jbusvent.2011.11.003Search in Google Scholar
Moss, T. W., M. Meyskens, and D. O. Neubaum. 2015. “The Effect of Virtuous and Entrepreneurial Orientations on Microfinance Lending and Repayment: A Signaling Theory Perspective.” Entrepreneurship Theory and Practice 39 (1): 27–52.10.1111/etap.12110Search in Google Scholar
Mousa, F., S. Harper, and W. Wales. 2015. “When Less Is More: EO’s Influence upon Funds Raised by Young Technology Firms at IPO.” Journal of Business Research 68 (2): 306–13.10.1016/j.jbusres.2014.07.003Search in Google Scholar
Nunnally, J. 1978. Psychometric Theory, 2nd ed. New York: McGraw-Hill.Search in Google Scholar
Parhankangas, A., and M. Ehrlich. 2014. “How Entrepreneurs Seduce Business Angels: An Impression Management Approach.” Journal of Business Venturing 29 (4): 543. doi:10.1016/j.jbusvent.2013.08.001.Search in Google Scholar
Paul, S., and G. Whittam. 2010. “Business Angel Syndicates: An Exploratory Study Fo Gatekeepers.” Venture Capital 12 (3): 241–56.10.1080/13691061003711438Search in Google Scholar
Pérez-Luño, Ana, Patrick Saparito, and Shanti Gopalakrishnan. 2016. “Small and Medium-Sized Enterprise’s Entrepreneurial versus Market Orientation and the Creation of Tacit Knowledge.” Journal of Small Business Management 54 (1): 262–78.10.1111/jsbm.12144Search in Google Scholar
Peterson, S., and F. Luthans. 2003. “The Positive Impact and Development of Hopeful Leaders.” Leadership & Organization Development Journal 24 (1): 26–31.10.1108/01437730310457302Search in Google Scholar
Ping, R. 2004. “On Assuring Valid Measures for Theoreticla Models Using Survey Data.” Journal of Business Research 57 (2): 125–41.10.1016/S0148-2963(01)00297-1Search in Google Scholar
Polak, F. L. 1973. “Responsibility for the future.” Humanist 33 (6): 14.Search in Google Scholar
Polivy, J., and C. P. Herman. 2000. “The False-Hope Syndrome: Unfulfilled Expectations of Self-Change.” Current Directions in Psychological Science 9 (4): 128–31.10.1111/1467-8721.00076Search in Google Scholar
Pope, R. 1983. “The Pre-Outcome Period and the Utility of Gambling,” in Foundations of Utility and Risk Theory with Applications,. edited by B. P. Stigum, and F. Wenstop, Theory and Decision Library Vol. 37, 137– 177. Netherlands: Springer10.1007/978-94-017-1590-4_9Search in Google Scholar
Prasad, D., G. D. Bruton, and G. Vozikis. 2000. “Signaling Value to Businessangels: The Proportion of the Entrepreneur’s Net Worth Invested in a New Venture as a Decision Signal.” Venture Capital: an International Journal of Entrepreneurial Finance 2 (3): 167–82.10.1080/13691060050135064Search in Google Scholar
Rauch, A., M. Frese, G. Lumpkin, and J. Wiklund. 2009. “Entrepreneurial Orientation and Business Performance: An Assessment of past Research and Suggestions for the Future.” Entrepreneurship Theory and Practice 33 (3): 761–87.10.1111/j.1540-6520.2009.00308.xSearch in Google Scholar
Sanders, W. G., and S. Boivie. 2004. “Sorting Things Out: Valuation of New Firms in Uncertain Markets.” Strategic Management Journal 25 (2): 167–86.10.1002/smj.370Search in Google Scholar
Short, J., K. Brigham, J. Broberg, and C. Cogliser. 2010. “Construct Validation Using Computer-Aided Text Analysis (CATA): An Illustration Using Entrepreneurial Orientation.” Organizational Research Methods 7 (4): 320–47.10.1177/1094428109335949Search in Google Scholar
Shrout, P. E., and N. Bolger. 2002. “Mediation in Experimental and Nonexperimental Studies: New Procedures and Recommendations.” Psychological Methods 7 (4): 422–45.10.1037/1082-989X.7.4.422Search in Google Scholar
Smith, D. J., R. T. Harrison, and C. M. Mason. 2010. “Experience, Heuristics and Learning: The Angel Investment Process.” Frontiers of Entrepreneurship Research 30 (2): 3.Search in Google Scholar
Snyder, C. 2000a. Handbook of Hope. San Diego, CA: Academic Press.Search in Google Scholar
Snyder, C. 2000b. “The past and Possible Futures of Hope.” Journal of Social and Clinical Psychology 19 (1): 11–28.10.1521/jscp.2000.19.1.11Search in Google Scholar
Snyder, C., J. Anderson, and L. Irving. 1991. “Hope and Health: Measuring the Will and the Ways,” in Handbook of Social and Clinical Psychology, edited by C. R. Snyder, and D.R. Forsyth, 285–305. Elmsford, NY: PergamonSearch in Google Scholar
Snyder, C. R. 2002. “Hope Theory: Rainbows in the Mind.” Psychological Inquiry 13 (4): 249–75.10.1207/S15327965PLI1304_01Search in Google Scholar
Sohl, J. 2005. Analysis of the 2004 Angel Investor, New Hampshire: Center for Venture ResearchSearch in Google Scholar
Spence, M. 1973. “Job Market Signaling.” The Quarterly Journal of Economics 87 (3): 355–74.10.2307/1882010Search in Google Scholar
Stedler, H. R., and H. H. Peters. 2003. “Business Angels in Germany: An Empirical Study.” Venture Capital 5 (3): 269–76.10.1080/1369106032000126596Search in Google Scholar
Sudek, R. 2006. “Angel Investment Criteria.” Journal of Small Business Strategy 17 (2): 89–103.Search in Google Scholar
Wang, T., and M. Song. 2016. “Are Founder Directors Detrimental to New Ventures at Initial Public Offering?” Journal of Management 42 (3): 644–70.10.1177/0149206313495412Search in Google Scholar
Waterworth, J. M. 2004. “An Analysis of Everyday Hope.” In A Philosophical Analysis of Hope, 3–30. London: Palgrave Macmillan.10.1057/9780230506022_2Search in Google Scholar
Weiss, A. 1995. “Human Capital Vs. Signaling Explanations.” Journal Of Economic Perspectives 9 (4): 133–54.10.1257/jep.9.4.133Search in Google Scholar
Wiklund, J., and D. A. Shepherd. 2011. “Where to from Here? EO-as-experimentation, Failure, and Distribution of Outcomes.” Entrepreneurship Theory and Practice 35 (5): 925.10.1111/j.1540-6520.2011.00454.xSearch in Google Scholar
Wong, A., M. Bhatia, and Z. Freeman. 2009. “Angel Finance: The Other Venture Capital.” Strategic Change 18 (7–8): 221–30.10.1002/jsc.849Search in Google Scholar
Yamakawa, Y., and M. S. Cardon. 2017. “How Prior Investments of Time, Money, and Employee Hires Influence Time to Exit a Distressed Venture, and the Extent to Which Contingency Planning Helps.” Journal of Business Venturing 32 (1): 1–17.10.1016/j.jbusvent.2016.10.002Search in Google Scholar
Youssef, C., and F. Luthans. 2007. “Positive Organizational Behavior in the Workplace: The Impact of Hope, Optimism, and Resilience.” Journal of Management 33 (5): 774–800.10.1177/0149206307305562Search in Google Scholar
Zhao, X., Q. Chen, and J. G. Lynch. 2010. “Reconsidering Baron and Kenny: Myths and Truths about Mediation Analysis.” Journal of Consumer Research 37 (2): 197–206.10.1086/651257Search in Google Scholar
© 2019 Walter de Gruyter GmbH, Berlin/Boston
