TY - JOUR
T1 - How much prestige is enough? Assessing the value of multiple types of high-status affiliates for young firms
AU - Pollock, Timothy G.
AU - Chen, Guoli
AU - Jackson, Eric M.
AU - Hambrick, Donald C.
N1 - Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2010/1
Y1 - 2010/1
N2 - Young, unproven firms can signal their worthiness, or potential, through affiliations with various types of prestigious parties. Drawing from signaling theory, we present a formal consideration of the implications of multiple numbers and types of prestigious affiliates for IPO valuations. We argue that different types of prestigious affiliates - prestigious executives, directors, venture capital firms, and underwriters - convey different signals of IPO worth, depending on the extent to which they provide certification or substantive benefits. Based on a sample of 257 software IPOs, we find considerable support for our expectations. The benefits of prestigious executives and directors accumulate in a linear, more is better fashion; in contrast, the payoffs from VC and underwriter prestige accumulate in a curvilinear fashion. We discuss the theoretical implications of these findings and propose an agenda for future research.
AB - Young, unproven firms can signal their worthiness, or potential, through affiliations with various types of prestigious parties. Drawing from signaling theory, we present a formal consideration of the implications of multiple numbers and types of prestigious affiliates for IPO valuations. We argue that different types of prestigious affiliates - prestigious executives, directors, venture capital firms, and underwriters - convey different signals of IPO worth, depending on the extent to which they provide certification or substantive benefits. Based on a sample of 257 software IPOs, we find considerable support for our expectations. The benefits of prestigious executives and directors accumulate in a linear, more is better fashion; in contrast, the payoffs from VC and underwriter prestige accumulate in a curvilinear fashion. We discuss the theoretical implications of these findings and propose an agenda for future research.
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U2 - 10.1016/j.jbusvent.2009.01.003
DO - 10.1016/j.jbusvent.2009.01.003
M3 - Article
AN - SCOPUS:70449638640
SN - 0883-9026
VL - 25
SP - 6
EP - 23
JO - Journal of Business Venturing
JF - Journal of Business Venturing
IS - 1
ER -