How much prestige is enough? Assessing the value of multiple types of high-status affiliates for young firms
Author: Pollock, Timothy G. ; Chen, Guoli ; Hambrick, Donald C. ; Jackson, Eric M.INSEAD Area: StrategyIn: Journal of Business Venturing, vol. 25, no. 1, January 2010 Language: EnglishDescription: p. 6-23.Type of document: INSEAD ArticleNote: Please ask us for this itemAbstract: 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.| Item type | Current location | Call number | Status | Date due | Barcode | Item holds |
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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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