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Putting Money Where the Mouths Are: The Relation Between Venture Financing and Electronic Word-of-Mouth
Abstract
External financing is critical to ventures that do not have a revenue source but need to recruit employees, develop products, pay suppliers, and market their products/services. There is an increasing belief among entrepreneurs that electronic word-of-mouth (eWOM), specifically blog coverage, can aid in achieving venture capital financing. Conflicting findings reported by past studies examining eWOM make it unclear what to make of such beliefs of entrepreneurs. Even if there were generally agreed-upon results, a stream of literature indicates that because of the differences in traits between the prior investigated contexts and venture capital financing, the findings from the prior studies cannot be generalized to venture capital financing. Extant studies also fall short in examining the role of time and the status of entities generating eWOM in determining the influence of eWOM on decision making. To address this dearth of literature in a context that attracts billions of dollars every year, we investigate the effect of eWOM on venture capital financing. This study entails the challenging task of gathering data from hundreds of ventures along with other sources including VentureXpert, surveys, Google Blogsearch, Lexis-Nexis, and Archive.org.
The key findings of our econometric analysis are that the impact of negative eWOM is greater than is the impact of positive eWOM and that the effect of eWOM on financing decreases with the progress through the financing stages. We also find that the eWOM of popular bloggers helps ventures in getting higher funding amounts and valuations. The empirical model used in this work accounts for inherent selection biases of entrepreneurs and venture capitalists, and we conduct numerous robustness checks for potential issues of endogeneity, selection bias, nonlinearities, and popularity cutoff for blogs. The findings have important implications for entrepreneurs and suggest ways by which entrepreneurs can take advantage of eWOM.
... Over the past decade, electronic word-of-mouth (eWOM) emitted via social media emerged as an impactful source of information . eWOM comprises the valence (i.e., sentiment) and volume (i.e., amount of information) of online communication (Chen et al., 2011) is generally found to play a significant role in the general financial market , for IPOs (Aggarwal et al., 2012) as well as ICOs (Chanson et al., 2018a, b). Signaling theory explains the process of acquiring additional information to compensate for weak signals to overcome information asymmetry (Karasek & Bryant, 2012). ...
... Finally, a larger volume of eWOM serves as an effective signal to overcome information asymmetry, because it increases observability of information for the receiver (Spence, 1975). Put differently, if a topic is covered more extensively on social media, the likelihood is higher that it is being noticed by a receiving observer (Aggarwal et al., 2012). Such observability, in turn, represents a signal that can help to effectively overcome information asymmetry (Spence, 1975). ...
... We followed the well-established precedence of prior research exploring the financial performance of fundraising mechanisms (Amsden & Schweizer, 2018;Benedetti & Kostovetsky, 2021;Chanson et al., 2018a, b;Fisch et al., 2019;Jin et al., 2017;Perez et al., 2020;Roosenboom et al., 2020;Thies et al., 2022;Wang et al., 2022), which has high informational value as a continuous variable. The total fundraising amount represents the most relevant dependent variables in the wider context of entrepreneurial finance research (e.g., Aggarwal et al., 2012;Mollick, 2014). We obtained data points for the total fundraising amount from "ICODrops." ...
Initial coin offerings (ICOs) and initial exchange offerings (IEOs) are distinct blockchain-based token offerings. Following multiple frauds associated with decentralized and unregulated ICOs, IEOs are emerging as a novel pathway that relies on centralized crypto exchange platforms acting as intermediaries. However, the question as to how this shift affects fundrais-ing processes in what has traditionally been a decentralized environment remains unresolved. We here address this issue by empirically comparing the performance of ICOs and IEOs through the lens of signaling theory, focusing specifically on the impact of social media information across 305 token offerings (ICOs and IEOs). Our work introduces IEOs and explains how and why the volume and sentiment of social media signals may serve as predictors of fundraising performance. We furthermore find that the impact of these electronic word-of-mouth (eWOM) media signals is reduced in the case of IEOs-in the presence of a central cryptocurrency exchange platform mediator. We delineate implications for investors, ventures, platform providers, and regulators alike.
... Furthermore, Kim and Ko (2012) have argued that SM enhances value equity, relationship equity and brand equity; in particular, Jin et al. (2017) have found that SMU is an effective way to improve a start-up's ability to find new financial resources, and Aggarwal et al. (2012) found that SMU advantage is stronger the younger the company is. ...
... This provides informational and relational resources for entrepreneurial firms. In this regard, Aggarwal et al. (2012) have found that start-ups that leverage social networks increase their access to financial resources and improve their likelihood to attract financial capital, whereas other scholars hold that SM improve their ability to recruit skilled employees and gain access to their tacit knowledge (Stuart and Sorenson, 2005;DiStaso and McCorkindale, 2013). Moreover, better access to financial and human resources via SM can also be evidenced by the fact that a lot of fundraising and recruiting activities have recently been happening online or via SM platforms (e.g. ...
... Interestingly, the start-ups examined in our sample provide practical examples in this regard. For example, it is interesting to note that some of these companies take significant advantages from SM for RM, in particular in terms of recruitment and access to financial capital which is coherent with previous results (Aggarwal et al., 2012;Jin et al., 2017). Some start-ups in our sample increased their recruiting capacity and were able to attract high-level profiles. ...
Purpose
The aim of this paper is to investigate how social media use (SMU) affects the entrepreneurial orientation (EO) and entrepreneurial opportunities (EOP) of start-ups.
Design/methodology/approach
The hypothesis testing and analysis were conducted using the partial least squares approach to structural equation modeling (PLS-SEM).
Findings
The research shows that SMU has a strong positive impact on EOP, while it has no impact on start-ups' EO. Interestingly, the impact of SMU on EOP is stronger than the impact of EO on EOP.
Originality/value
The findings add new knowledge to the emerging research stream that focuses on SMU in the context of entrepreneurship and provides useful insights for both scholars and practitioners. In particular, the evidence suggests implications for stakeholders with regard to their firms' entrepreneurial activities. This research offers several possible avenues for future research.
... Furthermore, some authors have investigated Yelp through the concepts provided by Social Network Analysis, like homophily [55], to study the social influence existing among friends [65]. Some researchers have employed these results to outline the decision making of users on purchases [78], while other ones have studied the possible impacts of electronic Word of Mouth (eWOM) in online businesses [22,23,2]. Several studies have explored the causes leading people to publish reviews [33], while others have analyzed reviewer strategies to improve their effectiveness [27,69,47]. Finally, some studies have focused on the analysis of review usefulness [76,67,43], while others have investigated the differences between positive and negative reviews [77,42]. ...
... The practical implications of negative reviews and influencers we find in this paper have a large variety of applications. First of all, it was proved that negative reviews have a stronger effect on businesses than positive ones [2]. Furthermore, influencers play a crucial role for the successful placement of products in a social network. ...
... Finally, gaining trust through online reviews can help a business gather venture capitals for its growth [26,43]. As a matter of fact, reviews are consumer opinions, unfiltered by traditional media, more sincere and imperfect [2,22]. For this reason, a proper coverage of positive reviews can attract more financiers [2,23,42]. ...
In this paper, we propose an investigation of negative reviews and define the profile of negative influencers in Yelp. The methodology adopted to achieve this goal consists of two phases. The first one is theoretical and aims at defining a multi-dimensional social network based model of Yelp, three stereotypes of Yelp users, and a network based model to represent negative reviewers and their relationships. The second phase is experimental and consists in the definition of five hypotheses on negative reviews and reviewers in Yelp and their verification through an extensive data analysis campaign. This was performed on Yelp data represented by means of the models introduced during the first phase. Its most important result is the construction of the profile of negative influencers in Yelp. The main novelties of this paper are: (i) the definition of the two social network based models of Yelp and its users; (ii) the definition of three stereotypes of Yelp users and their characteristics; (iii) the construction of the profile of negative influencers in Yelp.
... Virtually every successful IT company was dependent on external financing over the whole course of its existence, with a particular vulnerability in its first years (Kim et al. 2017;Dos Santos et al. 2011). External capital plays a key role in the formation and development of IT ventures, as these companies often have to finance costly growth strategies while no significant revenue sources are present (Aggarwal et al. 2012). As such, even the formation of entire new technological ecosystems depend on external financing (Breznitz et al. 2018). ...
... Consequently, external financing has been studied intensely by the Information Systems (IS) community. For example, scholars have examined the influence of blogs on different aspects of venture capital (Aggarwal et al. 2012;Aggarwal and Singh 2013), the role of venture capital for the formation of new technological ecosystems (Breznitz et al. 2018), or the influence of media coverage on the geographic focus of venture capitalists (Greenwood and Gopal 2016). Besides venture capital, IS researchers have also studied other funding mechanisms such as Initial Public Offerings (IPOs) (e.g., Ceccagnoli et al. 2012;Lundmark et al. 2017), crowdfunding (e.g., Burtch and Chan 2019;Hong et al. 2018), or debt (e.g., Kim et al. 2017;Kim and Mithas 2011). ...
... Considerable IS research concerning external financing has been directed towards the informational power of different mediums such as news articles, blogs, microblogs, etc. (e.g., Aggarwal et al. 2012;Aggarwal and Singh 2013;Greenwood and Gopal 2016). These efforts are rooted in decades of research considering the impact of the availability and quality of information on markets, which have even led to a Nobel Prize (Akerlof 1970). ...
The formation of IT companies and even of entire new technological ecosystems depends heavily on external financing. Consequently, the IS community has intensely studied various financing sources such as venture capital, initial public offerings or debt. Blockchain technology has led to the emergence of a system of decentralized finance (DeFi) which includes decentralized versions of equity and debt financing. In particular, equity-like fundraisings referred to as initial coin offerings (ICO) have received serious traction. In this paper, we investigate the role of user-generated content (UGC) for ICO success. Specifically, we leverage signaling theory to analyze how the activity on blogs and discussion forums is related to the amount of capital raised and the valuation in ICOs. We analyze data of 216 ICOs and provide first results indicating the importance of discussion forum activity for ICO success. Furthermore, we find that blogs seem less relevant than in traditional finance.
... smooth the extreme values, we used the logarithm of subjectivity and negativity suggested by prior literature [1,32,34,36]. Furthermore, to validate our model, we conducted Granger causality test [13] to investigate the direction of causal relationship between eWOM and price decline of used video games. ...
... To address the endogeneity concern, we used the well-established instrumental variables (IV) approach [90]. This approach requires that instrumental variables affect review rating but do not directly affect price decline of used video games [1,44]. The two instruments that we find suitable are the average rating of all other games belonging to the same type, and lagged review rating. ...
... In addition, to further ensure the potential weak identification issue of our instruments, we checked the F-statistics value. The value (F = 326.126) is much larger than the critical value of 10 [1], indicating that our instruments are not weakly identified. ...
As mobile wallets are in constant demand and growing over the past few years, there is a need to identify views of different stakeholders involved in the process. Several studies have been done to investigate consumers' perspective intensively. On the other hand, review of perception and adoption of wallet services by other participants, in particular merchants, is often neglected. The present study aims to fill this gap. This study used an empirical model to measure merchant's intention to use a mobile wallet technology. The study includes the variables, perceived compatibility, perceived usefulness, awareness, perceived cost, perceived customer value addition and perceived trust, and aims to determine their influence on intention to use. Our study also tested the mediating effect of perceived trust on the influence of perceived usefulness to predict merchant's intention. The study includes results of the survey of 315 Indian merchants by an online survey method. We find the highest effect of perceived customer value addition on merchant's intention, followed by perceived usefulness of technology. The proposed mediation effect of perceived trust was small but significant on perceived usefulness. The results of the study can help mobile payment companies to understand factors that are relevant to increase adoption of technology in the context of merchants.
... Defined as using game-design elements in non-gaming contexts [16,38], gamification has shown its great potential in learning, skill acquisition, attitude and behavior change. When it comes to business domain, it has been found that (1) gamification can be applied in enterprise to engage employees and increase the job performance [28,34]; (2) with the advent of web 2.0, gamification has evolved as a promising technique to increase customer engagement over the web [5]. Game-like elements, such as badges and mayorships, provide consumers a fun and playful way to keep track of their shopping activity and shopping experience, enjoying the sense of accomplishment and also create a friendly competition among friends. ...
... Forman et al. and Duan et al. find that review volume also affects product sales [17,20]. A lot of research has proven that WOM has a strong impact on sales, however, in terms of whether it is coming from positive reviews or negative ones, the findings are mixed [2,10]. Aggarwal et al. show that the impact of negative eWOM is stronger than the positive ones in the venture capital financing industry [2]. ...
... A lot of research has proven that WOM has a strong impact on sales, however, in terms of whether it is coming from positive reviews or negative ones, the findings are mixed [2,10]. Aggarwal et al. show that the impact of negative eWOM is stronger than the positive ones in the venture capital financing industry [2]. This stream of research has focused on the valence and the volume of reviews and missed another important component of review, which is the review textual content. ...
... To answer these questions, we define consumers' sentiment preference as the relative importance placed on various dimension-specific sentiments of eWOM when evaluating a product. The higher the sentiment preference of a dimension, the more persuasive the eWOM sentiment of that dimension (Aggarwal et al., 2012). We explain the persuasive effect of dimensionspecific sentiments using multi-attribute attitude theory, which breaks down the consumer's overall attitude of the product into different attitudes toward smaller product components that influence consumers differently (Fishbein, 1963;Hansen, 1969;Kraft et al., 1973). ...
... The opposite is true low-budget movies. Compared with high-budget movies already providing substantial quality assurances (i.e., product costs, star power), low-budget movies lack credible brand signals and thus their online reviews play a more important role in convincing consumers of movie quality (Holbrook & Addis, 2008;Aggarwal et al., 2012). Low-budget movies are often less able to afford actors with star power than high-budget movies. ...
While the literature has reached a consensus on the awareness effect of online word-of-mouth (eWOM), this paper studies its persuasive effect—specifically, dimension-specific sentiment effects on product sales.We examine the sentiment information in eWOM along different product dimensions and reveal different persuasive effects on consumers’ purchase decisions based on consumers’ sentiment preference, which is defined as the relative importance that consumers place on various dimension-specific sentiments. We use an aspect-level sentiment analysis to derive dimension-specific sentiment and PVAR (panel vector auto-regression) models, and estimate their effects on product sales using a movie panel dataset. The findings show that three dimension-specific sentiments (star, genre, and plot) are positively related to movie sales.Regarding consumers’ sentiment preferences, we find a positive relationship to movie sales that is stronger for plot sentiment, relative to star sentiment for low-budget movies. For high-budget movies, we find a positive relationship to movie sales that is stronger for star sentiment, relative to plot or genre sentiment.
... In this vein, prior findings that the investors seek information about the firm's performance from online review contents are noteworthy (Tirunillai & Tellis, 2012). Investors often have higher prior experience with the service domain (they have industry focus) and have high motivation to elaborate on online reviews as informational cues for their financial decisions (Aggarwal et al., 2012). As such, they fit the profile of experienced and thoughtful readers of online reviews that can be significantly affected by negativity bias (Aggarwal et al., 2012). ...
... Investors often have higher prior experience with the service domain (they have industry focus) and have high motivation to elaborate on online reviews as informational cues for their financial decisions (Aggarwal et al., 2012). As such, they fit the profile of experienced and thoughtful readers of online reviews that can be significantly affected by negativity bias (Aggarwal et al., 2012). This further emphasizes the importance of effective management of NRs. ...
The importance of online review valence is a subject of debate among scholars. Prior studies mostly assumed valence as a “peripheral” cue derived from online review surface features (e.g., star ratings). This assumption has important implications as it restricts the negativity bias effects to a certain group of consumers who lack pertinent prior experience with the product/service domain and the motivation to assess the product/service. Focusing on online service context and drawing on an adaptational view to negative information, we investigate the negativity bias in the effects of the valence of the “content” of online reviews on consumers’ attitudes and show that it can be attributed to the higher perceived diagnosticity of negative reviews. This is determined by consumers’ in-depth elaborations of reviews’ contents, which are contingent on their prior experience with the domain of online service and need for cognition. Our findings provide a new perspective to negativity bias by showing that more experienced and thoughtful consumers are also influenced by negativity bias when the content of online reviews is considered. This is a novel account of negativity bias in the effects of online reviews that underscores the importance of response strategies for reducing their adverse effects.
... With an aim to reduce information asymmetry between sellers and consumers, Spence [73] proposed the signaling theory, which suggests that observable entity attributes could serve as a signal of quality. The signaling theory has been successfully applied to a wide variety of scenarios, including e-commerce [56,84], Internet finance [14], electronic WOM [1], and investment decision support [29]. The three core components of the signaling theory are signalers, receivers, and the signal itself. ...
... For example, the works of Mann and Wissink [53,54] show that a money-back guarantee (MBG) mechanism provides an effective means to reduce customer purchase risk and helps better match consumer needs and product quality; Moorthy and Srinivasan [59] apply the signaling theory to indicate that MBG can be used as a valid quality signal by high-quality firms to guide uninformed consumers; in the paper of Biswas and Biswas [8], the signaling role of full refund policies is found to be more salient in the e-business environment than in conventional brick-and-mortar retailer stores, due to the lack of touch-and-feel and store ambiance cues. However, in reality, different signal receivers may interpret the same signal in different ways [1,18,73]. Sometimes receivers may weigh the signals in accordance with their characteristics and product characteristics, generating inconclusive feedback on the same signal. In contrast to the above findings, different interpretations of lenient return policies are observed in some recent studies. ...
Knowledge trading through online paid-knowledge platforms (i.e., knowledge monetization) has enjoyed tremendous growth in recent years. As experience goods, knowledge products often suffer from low sales due to information asymmetry. Therefore, some platforms have launched free return policies as post-purchase warranties to reduce uncertainty and stimulate sales. The impact of free returns on knowledge product sales is explored. Using data from a Chinese paid-knowledge platform, the results suggest that a free return policy negatively influences sales. Also, this relationship is weakened by information richness of extant reviews. The findings contribute to the literature and help platforms design optimal return policies.
... The literature has strongly suggested that the social network of the founder can affect her ability to receive and act on valuable information (Hahn et al. 2008;Ingram and Roberts 2000;Lerner and Malmendier 2013;Nanda and Sørensen 2010;Nicolaou and Birley 2003;Shane and Cable 2002). As a result, a founder's social networks can affect a variety of choices and outcomes including entry (Stuart and Ding 2006), fundraising (Aggarwal et al. 2012;Burton et al. 2002;Roberts and Sterling 2012), financing, and performance (Dahl and Sorenson 2012;Rider 2009;Roberts and Sterling 2012). Prior work also suggests that the network characteristics that drive performance in routine, execution-oriented tasks differ from the characteristics that benefit innovation-oriented tasks (Moran 2005). ...
... We show that the success of using a high-adaptability strategy for creating digital ventures depends, in the short-term, on having a mentor with high network diversity. Our results contribute to the emerging literature on digital entrepreneurship (Aggarwal et al. 2012;Aggarwal and Singh 2013;Burtch et al. 2013;Lin et al. 2013) by using a novel randomized design in a MOOC to document the strategic processes that were previously difficult to observe directly . Furthermore, our work responds to suggestions for the use of more robust research approaches by researchers studying digital innovation and ventures (Chatterji et al. 2016;Tanriverdi et al. 2010). ...
... Against this background, we seek to answer the first research question: Is the audience likely to engage more with positive-toned content or with negative-toned content? Whereas the focus of the past literature has been on analyzing the effects of tone of content generated by users and firms (Chevalier and Mayzlin 2006, Dellarocas et al. 2007, Aggarwal et al. 2012, our contribution lies in understanding the effects of the tone of the content generated by the human brands. ...
... Our findings have several important implications for academic literature and practice. The findings from earlier studies on the tone of UGC consistently show that emotionally charged content can affect various outcomes such as book sales, movie revenues, and venture capital funding (Chevalier and Mayzlin 2006, Dellarocas et al. 2007, Aggarwal et al. 2012. However, the results from the prior work on UGC may not extend to HGC, as HGC is primarily for self-promotion of human brands, whereas the primary focus of earlier studies on UGC has been on product reviews and consumers' interaction with firms. ...
With human brands or individual celebrities in fields ranging from sports to politics increasingly using social media platforms to engage with their audience, it is important to understand the key drivers of online engagement. Using Twitter data from the political domain, we show that positive and negative-toned content receive higher engagement, as measured by retweets, than mixed or neutral toned tweets. However, less popular human brands generate higher social media engagement from positive-toned content compared with more popular human brands. Therefore, we recommend that popular human brands (e.g., popular politicians or chief executive officers) keep their content objective rather than emotional. Furthermore, the tone of related brands (i.e., human brands who belong to the same political party) has a strong reinforcement effect; that is, social media engagement is higher when the tone of the focal human brand and related brands are the same and lower when the tones are different. Therefore, we prescribe that human brands actively coordinate their social media content with related brands to generate higher engagement. From human brands’ perspective, our findings recommend a comprehensive social media strategy, which takes into account the tone of content, tone of related brands’ content, and human brands’ popularity.
... Hence, users mainly rely on others' reviews (i.e., electronic word-of-mouth, eWOM) at the PPAP to estimate the quality of accommodation and service provided by the host. Despite the considerable research on positive eWOM, existing study has shown that negative eWOM is far more destructive than positive eWOM because of its superior capability to attract users' attention (Aggarwal et al. 2012). Due to the anonymity and lowcost of negative eWOM, many users are willing to express their true feelings and thoughts or release dissatisfaction toward products or services (Harrison-Walker 2001). ...
... Conversely, negative eWOM refers to "consumer response to dissatisfaction in the form of negative opinions or comments over peer-to-peer accommodation platform" in this study (Ahmad andSun 2018, Alexandrov et al. 2013). Despite a large body of literature on the benefit of positive eWOM (Hussain et al. 2018, Harrison-Walker 2001, several studies have manifested the more significant effect of negative eWOM (Aggarwal et al. 2012 due to its ability to widely spread and the fact that people prefer to believe dissatisfactory experiences (Herr et al. 1991). Prior research has suggested that some negative eWOMs are objective statements based on the fact, while others are irrational comments to defame the merchant (Hanson 2000). ...
... Other studies have combined the two methods. Aggarwal et al. (2012) deemed that writing blogs implies a cost effort and the number of blog coverages implies signal observability in their study on the influence of eWOM on venture financing. Therefore, they hypothesized that a high blog coverage is associated with substantial venture financing. ...
... Signaling theory states that cost and observability are the two necessary and sufficient characteristics for an effective signal (Connelly et al., 2011). Previous studies have mainly dealt with signal cost and observability as attributes and have merely investigated their direct impact on customers' cognitive evaluations and decisions (Aggarwal et al., 2012;. However, the interpretation distinctions between receivers determine the actual reception level of a signal (Connelly et al., 2011). ...
Purpose
Information asymmetry is an inevitable issue in e-commerce and largely hampers the development of online shopping. The purpose of this paper is to propose a model to investigate the emotional content of online customer reviews, which are considered an efficient way to reduce information asymmetry, as a potential signal of product quality. The moderating effects of perceived empathy and cognitive effort are also explored on the basis of signaling theory.
Design/methodology/approach
A laboratory experiment with 120 subjects was used to empirically test the proposed research hypotheses. The subjects were randomly assigned to two treatment groups, with 60 subjects in each group. ANOVA, linear regression and binary logistic regression were used.
Findings
The emotional content of online customer reviews positively influences perceived product quality, which subsequently and positively affects purchase decisions. The emotional content of online customer reviews greatly influences perceived product quality when perceived empathy or cognitive effort is high.
Originality/value
This study is the first to extend extrinsic cues to emotional content on the basis of signaling theory and reveals the important role of emotional content of reviews. Moreover, the mediating effect of perceived product quality and the moderating effect of perceived empathy and cognitive effort illustrate the mechanism of the influence of emotional content on purchase decision. Findings demonstrate the positive signal of emotional content and provide important practical implications for sellers and customers.
... Third, drawing on signaling theory (Ahlers et al. 2015;Busenitz et al. 2005;Connelly et al. 2011;Spence 1973), we propose theoretical arguments and provide empirical evidence important to the startup finance industry, by indicating that crowdfunding and angel investing send different quality signals and attract different types of receivers. Finally, our study has significant implications for the development of policy and practical guidelines for startups seeking funding in the digitized world (Aggarwal et al. 2012;Aggarwal and Singh 2013). ...
... One possible strategy is to encourage expert investors to participate (Agrawal et al. 2015). Their better social networks will then help crowdfunded startups secure subsequent VC funding (Aggarwal et al. 2012;Aggarwal and Singh 2013). ...
... Third, drawing on signaling theory (Ahlers et al. 2015;Busenitz et al. 2005;Connelly et al. 2011;Spence 1973), we propose theoretical arguments and provide empirical evidence important to the startup finance industry, by indicating that crowdfunding and angel investing send different quality signals and attract different types of receivers. Finally, our study has significant implications for the development of policy and practical guidelines for startups seeking funding in the digitized world (Aggarwal et al. 2012;Aggarwal and Singh 2013). ...
... One possible strategy is to encourage expert investors to participate (Agrawal et al. 2015). Their better social networks will then help crowdfunded startups secure subsequent VC funding (Aggarwal et al. 2012;Aggarwal and Singh 2013). ...
... One such area involves connecting electronic word-ofmouth (EWOM) to how business ventures are able to obtain venture capital financing. In this research, Aggarwal et al. (2012) studied the area of social media sentiment EWOM, and applied valence analytics. They drew upon past work by Koppel and Schler (2006), who proposed the use of neutral examples for representing learning sentiment, and Savicky and Fürnkranz (2003), who trained meta-level classifier to resolve disputes that occurred with the conflicting predictions of the binary classifiers they used to classify sentiment valence. ...
... They drew upon past work by Koppel and Schler (2006), who proposed the use of neutral examples for representing learning sentiment, and Savicky and Fürnkranz (2003), who trained meta-level classifier to resolve disputes that occurred with the conflicting predictions of the binary classifiers they used to classify sentiment valence. The authors, Aggarwal et al. (2012), used these methods with advance regression and statistics methods for robust findings in their research context. ...
The transformation of empirical research due to the arrival of big data analytics and data science, as well as the new availability of methods that emphasize causal inference, are moving forward at full speed. In this Research Commentary, we examine the extent to which this has the potential to influence how e-commerce research is conducted. China offers the ultimate in data-at-scale settings, and the construction of real-world natural experiments. Chinese e-commerce includes some of the largest firms involved in e-commerce, mobile commerce, social media and social networks. This article was written to encourage young faculty and doctoral students to engage in research that can be carried out in near real-time, with truly experimental or quasi-experimental research designs, and with the clear intention of establishing causal inferences that relate the precursors and drivers of observable outcomes through various kinds of processes. We discuss: the relevant data sources and research contexts; the methods perspectives that are appropriate which blend Computer Science, Statistics and Econometrics, how the research can be made relevant for China; and what kinds of findings and research directions are available. This article is not a tutorial on big data analytics methods in general though, nor does it cover just those published works that demonstrate big data methods and empirical causality in other disciplines. Instead, the empirical research covered is mostly taken from Electronic Commerce Research and Applications, which has published many articles on Chinese e-commerce. This Research Commentary invites researchers in China and the Asia Pacific region to expand their coverage to bring into their empirical work the new methods and philosophy of causal data science.
... Meaning that, firms have a constant stream of information flow which can assist them in finding the right branding strategy. Aggarwal et al. (2012) have researched the effect of electronic word-of-mouth from the venture financing field. There results show that the impact of negative electronic word-ofmouth is greater than the impact of positive eWOM. ...
... What shouldn't be forgotten is that this technique of posting on blog sites to catch the attention of possible VCs has a limited affect. Moreover, referrals are essential for getting higher funding amounts and valuations from VCs because they simply give priority to the people who they can trust first (Aggarwal et al. 2012). In other words, the source of the electronic word-of-mouth is crucial in the decision making process of the VCs. ...
Marketers define their social media platform as an essential piece to reach their consumers. The flock of web users turning to social media to receive and convey their thoughts, opinions, and suggestions has made social media an integral part of digital marketing. Using traditional media to advertise had restrictions in placement and outcome while, nowadays, social media has liberated this obstacle. It has created a platform which allows information to spread freely and at a fast pace. Using electronic word-of-mouth in social media permits a constant connection to a vast audience. The purpose of this study is to explore the effect of electronic word-of-mouth within the context of social media on consumer purchase decisions. More precisely, how the familiarity of the Electronic Word of Mouth (eWOM) source, the way of communication, writer’s expertise and the popularity of a product affects the consumer's purchase decision. The data has been gathered using quantitative research method. The sample consists of students studying in Sarajevo and Timisoara. Having sample from two different countries would be good base for comparative analysis. The survey for data analysis was emailed to students’ email addresses. The results of the analysis will provide a comparison between the universities and the level of impact eWOM in social media has on their purchase decisions.
... Avenues for future research on the determinants of startup valuation in the VC context Second, scholars need to put their findings into a clearly understandable context to ensure those findings are a representation of the real world and not merely of methodological relevance (e.g., Ketchen & Shook, 1996). Thus, to substantiate and validate the cogency of the findings, future work might capitalize on the approach of Aggarwal et al. (2012) by additionally employing expert feedback. In addition, researchers also need to put their findings into the context of previous work, as for instance Gompers et al. (2010) did when setting their findings against those of Hsu (2004). ...
... A major reason for countries doing so is that startups spur productivity, efficiency by challenging the incumbent firms, and economic wealth, thereby contributing to a country's overall competitiveness (Cumming, Johan, & Zhang, 2014). Securing sufficient funding is often the impetus for the entrepreneurs of these startups to play a vital economic role (Aggarwal et al., 2012;Zheng et al., 2010). Particularly in the VC context, a startup's valuation determines how much financing can be raised, since a higher valuation implies a greater amount of funding (e.g., Cumming & Dai, 2011;Zheng et al., 2010). ...
The purpose of this dissertation is to examine the underlying determinants of startup valuation and startup acquisition in the venture capital (VC) context, with particular focus on the role of corporate venture capital (CVC). The first studyChapter 2titled The determinants of startup valuation in the venture capital context: A systematic review and avenues for future research is a systematic review of the literature on empirically examined determinants of startup valuations in the VC context. It compiles and organizes the determinants examined in 58 selected papers in an integrative framework. This framework shows that startup valuations in the VC context are shaped by factors related to three levels, namely startup, venture capitalists, and the external environment. Moreover, the review process makes it possible for the study to highlight academic voids and to outline promising paths for future research. In the second studyChapter 3Exploring the differences in early-stage startup valuation across countries: An institutional perspective, fuzzy-set qualitative comparative analysis (fsQCA) across a sample of 13 countries is applied to explore the driving factors of the institutional setting in combination with a countrys innovativeness determining high and low early-stage startup valuations across countries. Overall, the study identifies five configurations; two configurations explain the outcome of high early-stage startup valuations, and three configurations explain the outcome of low early-stage startup valuations across countries. By applying fsQCA, the study also highlights the benefits of a configurational approach to exploring the institutional determinants in combination with a countrys innovativeness underlying early-stage startup valuations in the VC context. The third studyChapter 4titled A world of difference? The impact of corporate venture capitalists investment motivation on startup valuation combines explorative research (computer-aided text analysis and cluster analysis) and theory-testing (hierarchical linear modeling) methods to disentangle the different types of the motivation underpinning corporate venture capitalists (CVCs) investments, and their impact on startup valuations. In its explorative part, the study identifies four types of CVCs investment motivation: financial, strategic, unfocused, and analytic. In its theory-testing part, the results show that CVCs with a strategic investment motivation assign significantly lower startup valuations, while CVCs with an unfocused investment motivation assign significantly higher valuations than their peers having an analytic motivation. Hence, the studys findings stress the heterogeneity of CVCs, thereby moving beyond the dominant black and white approach of the current academic discourse that labels CVCs as either strategic or financial. The fourth studyChapter 5titled From investment to acquisition: The impact of exploration and exploitation on CVC acquisition forms a bridge to the previous study by investigating the interplay of CVC investments and startup acquisitions drawing on the framework of exploration and exploitation. The study exploits a unique and diligently constructed dataset to shed light on the phenomenon of CVC acquisitions (i.e., a corporate mother acquiring a startup funded through its CVC unit) using computer-aided text analysis and logistic regression. The findings show that corporate mothers with a greater degree of explorative (exploitative) orientation are more (less) likely to engage in a CVC acquisition; and that this effect is negatively (positively) moderated by the extent of product market relatedness between startup and the potential acquirer. Taken as a whole, this dissertation is interested in the hitherto empirically studied determinants influencing startup valuations in the VC context; how the institutional setting affects early-stage startup valuations; the differing investment motivations of CVCs and their impact on the startup valuations assigned; and the underlying drivers of CVC acquisitions. To address these aspects, the dissertation draws on multiple streams of academic literature and various analytical methods. In doing so, this dissertation provides new and important insights that enhance the understanding of the entrepreneurial process by painting a more complete picture of the factors affecting the valuation and acquisition of startups in the VC context. Notwithstanding the dissertations contributions, it also discusses its limitations in outlining promising paths for future research. In sum, this dissertation can clearly serve as a door opener for future research seeking to further illuminate these under-researched, but crucial events in the entrepreneurial process.
... It is also a feature that is very different from traditional e-commerce. Previous studies have indicated that consumers' behavior is usually influenced by other users' reviews when making decisions in online shopping (Aggarwal et al. 2012;Aghakhani et al. 2021;Chevalier & Mayzlin 2006;Mudambi & Schuff 2010;Ye et al. 2011). However, unlike static customer reviews in conventional e-commerce, massive dynamic bullet screen information occupies the key position and flies across the screen during a live streaming event, which may affect consumers' experience and feelings throughout the live streaming commerce process. ...
Bullet screen as a type of real-time reviews published by viewers is an important unique feature in live streaming commerce. However, it is unclear whether and how bullet screen affects consumers’ purchase intention. Drawing upon elaboration likelihood model, this study developed a conceptual model integrating two variables for central cues and three variables for peripheral cues to explain consumers’ purchase intention. Using a big dataset of 668,591 records from the Taobao Live, the largest live streaming commerce platform in China, our empirical study finds that bullet screen has a vital role in influencing consumers’ purchase intention. Interestingly, bullet screen sentiment has a curvilinear relationship with purchase intention, and source credibility has a negative effect on purchase intention. In addition, product type moderates the impact of bullet screen on purchase intention, and the results indicate that peripheral cues have a stronger influence on purchase intention of experience products than search products. Our study contributes to customer review literature by exploring the influence of real-time reviews on consumer behaviors in live streaming commerce. It also offers a useful practical framework for platform providers and sellers.
... On the one hand, it is widely argued that entrepreneurship depends on the availability of slack resources (Aggarwal et al. 2012). For example, Uber and Airbnb enables would-be entrepreneurs to set up their own schedules and working patterns while earning stable pay (Hall and Krueger 2015;Swarns 2014); in turn, by exploiting this flexibility for their own benefit, people can then devote resources to ventures without loosing financial security. ...
... For instance, Gershoff et al. (2003) argue that positive extreme agreement is more influential than negative extreme agreement when advice valence is positive. However, others argue that message valence has no impact on consumers' judgement of the credibility of eWOM messages (Aggarwal et al., 2012;Cheung et al., 2009). ...
Consumers have always had a propensity to share their personal experiences of products/services/brands with others. Marketers have long appreciated the importance of such user-generated content and Ernest Dichter coined the term ‘word of mouth’ (WOM) advertising in 1966. In online environments, electronic word of mouth (eWOM) has become important to consumers, marketing academics and marketing practitioners. In an era where technology is ever-developing, the Internet is increasingly playing a vital role in our lives. In 2021, the number of Internet users had reached 4.54 billion, accounting for 59% of the world’s population (wearesocial, 2021). It is undeniable that the Internet has had a very significant influence on people’s lives, thereby also leading to an evolution in customers’ consumption habits (Liu et al., 2020; Yoo et al., 2013). Customers are now able to shop, communicate, acquire information and share thoughts without leaving their home, simply by moving their fingers (Hennig-Thurau et al., 2004; Jacobsen & Munar, 2012; Zhang et al., 2011).
Formally put, eWOM refers to any positive or negative statement made by potential, actual, or former customers about a product or company via the Internet (Hennig-Thurau et al., 2004; Ryan & Jones, 2009). According to a definition by Hennig-Thurau et al. (2004), any product/service/brand-related user generated content (UGC) can be seen as eWOM information. Meanwhile, eWOM also exists in most online media that support users in generating their own content. Therefore, eWOM is a very broad concept that exists in consumers’ generation of product/service/brand-related content in multiple online media. It is apparent that eWOM is a near-universal trend that has profoundly influenced the customer decision-making cycle and business performance. This chapter conceptualises and defines eWOM, highlighting the theoretical foci. Subsequently, the motivations of consumers’ eWOM engagement are examined, followed by categories of eWOM-related theories. The chapter concludes by presenting a contemporary view of the concept.
... Case Selection and Data Collection. We identified our cases based on the initiatives mentioned in news articles in the search engine provider Lexis-Nexis (Nexis Uni, academic search engine), which has also been used in other studies (e.g., Aggarwal et al. 2012) as well as especially in event-studies (e.g., Zhang and Nault 2019). We searched the database for news articles in the period from 01.01.2020 -30.06.2020 (see Figure 1), using both English and German search strings (keywords: English: (3D print OR 3D printing OR 3D-print OR 3D-printing) AND (ventilator OR ventilators), German: (3D Druck OR 3D-Druck) AND (Beatmungsgerät OR Beatmungsgeräte OR Beatmungsgeräts OR Beatmungsgeraete OR Beatmungsgeraet OR Beatmungsgeraets). ...
The rise of the COVID-19 pandemic around the globe led to a sudden increase in demand for medical ventilators to treat severely ill patients. In this work, we conduct case study research on the initiatives founded during the beginning of the COVID-19 pandemic that developed ventilators to address this shortage. Using a mixed-method design, we investigate the development of these ventilators, emphasizing digital technologies that enable a shift in the way innovation collectives form, communicate, and collaborate during a phase of shutdown and social distancing. First, we identify and gather data from 118 initiatives and use quantitative analysis to discover correlations among the data. Then, as qualitative analysis, we conduct interviews to shed light on the underlying innovation process mechanisms. We find new practical implications for innovation management and provide new insights about a new decentralized development process in communities.
... Providers also signal their customer orientation by going above and beyond consumer expectations, e.g., by gift-wrapping products for customers (Bockstedt & Goh, 2011). Third-party sources in these contexts include media coverage (Greenwood & Gopal, 2015), expert bloggers (Aggarwal et al., 2012), and social media endorsements . ...
Online markets for mental healthcare (OMMH) allow clients to connect remotely with counselors to receive psychological therapy. Rooted in signaling theory and in the specific context of an OMMH, we theorize relative credibility of signals as the boundary condition that determines whether the demonstration signal of responsiveness to client questions substitutes or complements the two description signals of professional qualifications and counseling style in predicting market demand for counselors from new clients in an OMMH. Based on a panel data set of 823 observations from 309 counselors participating on YiXinLi, a leading OMMH in China, we test our hypotheses using linguistic and sentiment analysis methods and zero-inflated negative binomial models. We find broad support for nine out of ten hypotheses. Findings are robust with respect to different measures of variables, potential endogeneity from simultaneity of responsiveness and counselor demand, and potential selection bias from both observable and endogenous covariates. Our study extends the literature on signaling in online markets in the unique context of OMMH by showing that: 1) relative credibility of signals is the boundary condition that determines when a demonstration signal will complement and when it will substitute a description signal; 2) previous clients’ feedback on counselors’ empathy and warmth was deemed not credible by new clients in the context of online counseling; and 3) responsiveness to client questions is the most influential predictor of market demand from new clients in an OMMH.
... Yang and Berger [87] asserts that social media sites utilisation enhances the success of start-ups financially. Research has shown that Twitter is associated with increased venture financing for start-ups [2], [40]. The benefits of social network sites to new entrepreneurs include advice, confirmation of decisions and emotional supports [84]. ...
One of the factors that can influence an individual to start a new business is the perception of danger and uncertainty. The COVID-19 pandemic and the COVID-19 protocols have left so many people with diverse perceptions of danger and uncertainties. In addition, the pandemic brought about an unprecedented increase in the use of social media sites. Therefore, this study investigates if Nigerian undergraduate students’ COVID-19 perception and social media site use influences them to engage in pre-start-up and start-up activities. The adopted study design is qualitative method that is based on Focus Group Interview (FGI). The study data were collected from final year students in 10 public Universities in South Eastern Nigeria. It was found from the thematic content analysis that despite the challenges posed by the COVID-19 pandemic and the COVID-19 rules, the undergraduate students were involved in pre-start-up and start-up activities owing to their positive perceptions of the COVID-19 rules and the use of social media sites. However, their start-up activities are constrained by lack of business capital. The researchers recommend the establishment of entrepreneurship development fund for undergraduate students. Qualitative and/or quantitative methods should be adopted to replicate this study in similar or different higher institutions in other parts of the world.
... Hence, to be precise, we refer to an NSB's digital identity. This is of particular interest, because the positioning of new businesses in the market (e.g., Navis & Glynn, 2010) and the striving for resources from external stakeholders (e.g., Aldrich & Fiol, 1994;Martens, Jennings, & Jennings, 2007) are activities that are more and more taking place online (Aggarwal, Gopal, Gupta, & Singh, 2012). ...
Die Überzeugung, dass Unternehmertum entscheidend ist, um verschiedene wirtschaftliche und soziale Probleme wie Arbeitslosigkeit anzugehen, hat Unternehmertum weltweit in einen meist politischen Diskurs eingebettet. Was dabei jedoch oft unberücksichtigt bleibt, ist die Tatsache, dass Unternehmertum Unternehmer verlangt. Trotz des (wirtschaftlichen und sozialen) Beitrags von Unternehmertum ist zum Beispiel nur sehr wenig darüber bekannt, wie attraktiv Unternehmertum für Individuen ist, was jedoch von hoher Relevanz ist, da die Attraktivität von Unternehmertum bestimmt, wer sich dafür entscheidet, Unternehmer zu werden. In diesem Zusammenhang stellt sich auch die Frage, wie Unternehmertum und Unternehmer allgemein wahrgenommen und verstanden werden. Was unternehmerisch ist, scheint für viele schwer definierbar, da verschiedene gesellschaftliche Akteure (z.B. Politiker, Kapitalgeber, Unternehmer oder die Gesellschaft als Ganzes) Dinge unterschiedlich sehen und wahrnehmen. Forschungsergebnisse zeigen, dass die bloße Existenz von Ressourcen nicht zum Wachstum des Unternehmertums in einer Wirtschaft an sich führt, da dies nicht bedeutet, dass Unternehmertum und Unternehmer auch von der Gesellschaft oder gesellschaftlichen Akteuren geschätzt und gefördert werden. Vor diesem Hintergrund befasst sich die vorliegende Dissertation mit der übergeordneten Forschungsfrage: Wie werden Unternehmer und Unternehmertum von verschiedenen Interessengruppen (und Unternehmern selbst) wahrgenommen?
... Hybrid studies, especially those using text mining, have been gaining in popularity in the information systems (IS) field in recent years (Chen et al. 2012). Abundant hybrid studies have been published during recent years in the information systems discipline (Ghose and Ipeirotis 2011, Aggarwal et al. 2012, Ghose et al. 2012, Wang et al. 2013, Chan and Wang 2014, Goes et al. 2014, Gu et al. 2014, Moreno and Terwiesch 2014, Singh et al. 2014, Mousavi et al. 2015, Zhang et al. 2016, Kim and Park 2017. Text classification algorithms are the most commonly used data mining methods in hybrid studies, which are used to classify the textual contents in online platforms, such as consumer reviews Ipeirotis 2011, Ghose et al. 2012), answers in a Q&A community (Mousavi et al. 2015), and postings in virtual communities about investment (Gu et al. 2014). ...
There is a surge of interest in social science studies in applying data mining methods to construct variables for regression analysis. For example, text classification was applied to classify whether the review is subjective or objective. The derived review subjectivity was used as an independent variable in the regression to examine its impact on review helpfulness. In the classification phase of these studies, researchers need to subjectively choose a classification performance metric for optimization. No matter which performance metric is chosen, the constructed variable still includes classification error because the variable cannot be classified perfectly. The misclassification of constructed variables will lead to inconsistent estimators of regression coefficients in the following phase. To correct the estimation inconsistency, we summarize and modify existing proofs in econometrics to derive theoretical formulas of consistent estimators in generalized linear models. The main implication of our theoretical result is that the inconsistency can be corrected by theoretical formulas, even when the classification accuracy is poor. Therefore, we propose that a classification algorithm should be tuned to minimize the standard error of the focal coefficient derived based on the corrected formula. As a result, researchers derive a consistent and most precise estimator in generalized linear models.
... Kaur and Gera (2017) confirm the results of previous research stressing that social interaction and connectivity have a positive impact on attracting funds for a CF project. Aggarwal et al. (2012), based on the volume of conversation generated through social media, also find that eWOM has a positive impact on venturing's financing. ...
Crowdfunding (CF) is a financial tool that has faced an impressive growth over the past few years, and provides an alternative form of fundraising entrepreneurial projects. However, not all CF campaigns are successful in attracting the investors’ interest and obtaining the pledging goal. As CF is built over internet platforms, digital marketing strategies have been used to improve awareness and engage people to contribute with small amounts of money for a given CF campaign.
Hence, this paper intends to study the effect of social media and electronic word of mouth (e-WOM) on the CF campaigns’ outcomes and whether these digital marketing strategies might influence the small investors’ decision to support or not a reward-based CF campaign.
Using a sample of data from the second largest American reward-based CF platform (Indiegogo), we have applied the multiple OLS regression analysis, to assess the causal effect of various sets of variables in the success rate of a CF campaign.
The findings show that social media and e-WOM strategies play a critical role and have a positive significant impact on a CF campaign.
... The matter of greater concern, however, is the complete lack of attention to roles other than those related to consumption and development of technology. In last 5 years, only one paper focused on technology blogger (Vaast et al. 2013) and just one on venture capitalist investing in IT firms (Aggarwal et al. 2012). Even though we are sure that other IS journals would have published articles covering some other actors, the results from leading journals convey an overall pattern which we expect to be approximately repeated at other outlets as well. ...
Patrons are widely recognized to be instrumental in the nourishment of creative endeavors like art, music, etc. But the role of a patron and the phenomenon of patronage have never been explored in the context of technology. Some of the individuals enthusiastic about technology demonstrate interest in supporting technology research and development through donations, crowdfunding, etc. It should, therefore, be of significant interest for researchers of human-technology interactions to study these behaviors using the concept of patronage. Hence, with this paper, we aim to introduce technology patron and patronage to IS research. We begin with a review and classification of existing roles studied in recent IS literature to uncover a gap in focus on technology support category, wherein we eventually define the scope of a patron. We conclude with process maps, a conceptual framework, and some research questions on technology patronage, to establish a foundation for future research.
... To test the hypotheses proposed above, we use simultaneous equation models. This approach is suitable when there is simultaneity between the dependent variable and the independent variables and has been used in several previous studies (Aggarwal, Gopal, Gupta, & Singh, 2012;Duan, Gu, & Whinston, 2008;X. Lu, Ba, Huang, & Feng, 2013). ...
... From the financial prospective, negative eWOM seems to have a great impact more than positive eWOM. Therefore, it is suggested that one way to overcome such a situation is through approaching key bloggers who have the power to create negative or positive eWOM on their websites to reverse the negativity impact which if not stopped, it is shown that it will cause huge financial problems for ventures (Aggarwal et al., 2012). In a study about online book reviews on Amazon website and their effects on books' sales, it has been found that negative reviews are more damaging than positive ones to the sales and one star reviews are more than five stars reviews since they are referring to books negatively (Chevalier & Mayzlin, 2006 The discussions of previous studies lead to conclude that negative eWOM is very influential and is considered destructive to firms if not resolved in time. ...
The judgment of consumers conveyed over the internet plays a vital role in the consumer decision-making process. Hence, the appearance of electronic word of mouth (eWOM) has become one of the most effective marketing techniques in the 21 st century. This research was aiming to determine the predictors of negative eWOM while investigating whether negative eWOM has any specific effect on consumers' purchase intention. A quantitative research approach was employed while questionnaire data has been collected from more than 250 Malaysian consumers and tested empirically a model that incorporates motives of negative eWOM. Structural equation modelling technique has been used to test the research hypotheses. The findings have shown the different predictors of negative eWOM, which were labelled advice seeking, dissonance reduction and altruism while venting negative feelings proved to be an ineffective motive. The result was able to confirm that negative eWOM has a significant mediating effect on purchase intention. This has contributed insights into the lacking area of consumers' negative eWOM and argues for identification from marketer's view, which is an essential step towards consumer's purchase intention. While in the article, a series of relationships has developed which future researchers may find useful in advancing research in this area.
... However, other studies have shown a "negativity bias" in users' evaluations of online reviews (e.g., Aggarwal, Gopal, Gupta, & Singh, 2012;Chang & Wu, 2014;Lee, Park, & Han, 2008). It is a well-documented psychological principle that negativity is in general more memorable than good information (Baumeister, Bratslavsky, Finkenauer, & Vohs, 2001). ...
Whom do we trust more, the recommendation of an expert or public opinion from a crowd of other users of the site? Does it matter if the expert belongs to our in-group? And, what, if anything, would change if an Artificial Intelligence (AI) system was the recommender rather than a human expert? In order to answer these research questions, we conducted a between-subjects online experiment, informed by MAIN Model (Sundar, 2008), which posits that interface cues signaling different types of sources can influence perceived credibility of content by triggering distinct cognitive heuristics. Participants were assigned to a scenario wherein the expert review contrasted the peer rating about recommending photos for business profiles, with systematic variations in expert review valence (negative vs. positive), expert identity (ingroup vs. outgroup vs. no identity), and agent type (human vs. AI). Results show that positive ratings are more influential on user judgements. However, for negative ratings, human ingroup members generated greater effects than no-identity experts. Moreover, AI systems were as influential as human experts, suggesting the potential for AI to substitute human experts for online recommendations.
... In the context of our research, knowledge products are similar to typical experience products; audiences who purchase a live before it is broadcasted may receive and interpret different signals from those who purchase a live after it has been broadcasted. Signaling theory has been applied to a wide range of management studies, including electronic commerce research [29,30], online trust building, venture capital financing, electronic word-of-mouth ( [31], investor decisions [32,33], and P2P lending [34]. Prior researchers have identified a variety of quality signals. ...
... For example, Facebook's thumbs-up function significantly improves sales performance (Lee et al., 2015). Online feedback system reduces the negative impact of information asymmetry (Aggarwal et al., 2012) and thus promotes sales (Chevalier and Mayzlin, 2006;Chintagunta et al., 2010;Dhar and Chang, 2009). In addition, the influence of user's own characteristics on sales performance has also been studied. ...
Purpose
Knowledge sharing has entered the stage of knowledge payment with the typical models of paid Q&A, live session, paid subscription, course column and community service. Numerous knowledge suppliers have begun to pour into the knowledge payment market, and users' willingness to pay for premium content has increased. However, the academic research on knowledge payment has just begun.
Design/methodology/approach
In this paper, the authors searched several bibliographic databases using keywords such as “knowledge payment”, “paid Q&A”, “pay for answer”, “social Q&A”, “paywall” and “online health consultation” and selected papers from aspects of research scenes, research topics, etc. Finally, a total of 116 articles were identified for combing studies.
Findings
This study found that in the early research, scholars paid attention to the definition of knowledge payment concept and the discrimination of typical models. With the continuous enrichment of research literature, the research direction has gradually been refined into three main branches from the perspective of research objects, i.e. knowledge provider, knowledge demander and knowledge payment platform.
Originality/value
This paper focuses on discussing and sorting out the key research issues from these three research genres. Finally, the authors found out conflicting and contradictory research results and research gaps in the existing research and then put forward the urgent research topics.
... Seizing this opportunity, IS researchers have recently demonstrated a growing interest in the content of ICTbased communications by conducting microlevel analyses of content such as online reviews, blogs, and microblogs (Aggarwal, Gopal, Gupta, & Singh, 2012;Kuan, Hui, Prasarnphanich, & Lai, 2015;Stieglitz & Dang-Xuan, 2013). Furthermore, user-generated political content, such as online petitions, disseminated via Internet media, shows an ever-increasing influence on political activism, social movements, and national and societal progress (Majchrzak, Markus, & Wareham, 2016). ...
Online petitions have become a powerful tool used by the public to affect change in society. Despite the increasing popularity of these petitions, it remains unclear how the public consumes and interprets their content and how this helps the creators of online petitions achieve their goals. This study investigates how linguistic factors present in online petition texts influence petition success. Specifically, drawing upon the dual-process theory of persuasion and the moral persuasion literature, this study examines cognitive, emotional, and moral linguistic factors in petition texts and identifies how they contribute to the success or failure of online petitions. The results, which are based on an analysis of 45,377 petitions from Change.org, show that petitions containing positive emotions and enlightening information are more likely to succeed. Contrary to popular belief, petitions containing heavy cognitive reasoning and those emphasizing moral judgment are less likely to succeed. This study also exemplifies the use of an analytical approach for examining crowd-sourced content involving online political phenomena related to policy-making, governance, political campaigns, and large social causes.
... For a recent survey of venture capital research covering these and many other areas, see Da Rin,Hellmann, and Puri (2013). For examples of the growing literature that investigates the conditions under which start-up firms will receive venture capital financing, seeAggarwal, Gopal, Gupta, and Singh (2012) andGreenwood and Gopal (Forthcoming). ...
The diffusion of new information technology (IT) requires the development of an ecosystem of hardware and software producers, users, and other firms. It is widely believed that venture capitalists (VCs) can play a role in the development of such ecosystems. However, empirical research to elaborate on these points is lacking. Focusing on the recent rapid rise of one platform, cloud computing, we assemble a unique dataset to look at the period just before wide acceptance of the cloud. We find evidence of complementarity between VC financing and the introduction of new products offered over the cloud. Moreover, the complementarity effects are significantly stronger for firms backed by VCs that had rich experience in the IT industry and are significantly weaker for firms that had prior experience developing traditional client/server products. These results provide evidence that supports a role for VC financing in the creation of new technological ecosystems.
... The product descriptions of established firms are obtained from annual reports (10-Ks) that are updated as required by financial market regulations (Hoberg and Phillips 2016;Tetlock 2011;Tetlock et al. 2008). The product descriptions of startups are obtained from the VentureXpert dataset, commonly used in entrepreneurship research (Aggarwal et al. 2012). The VC-backed entrepreneurial firms have baseline quality and therefore represent credible threats of entry to incumbents (Aggarwal et al. 2015). ...
Prior research on corporate governance has offered contradictory empirical evidence on the relationship between the independence of the board of directors (the degree to which the board consists of outside directors who are not affiliated with the company) and firm performance. Building on the contingency view of corporate governance, we argue that the presence of significant new entry threats (NET), a unique feature that differentiates the IT industry from many other industries, is a critical contextual variable that moderates this relationship. Leveraging a novel NET measure based on text mining, we show that facing high NET, firms with boards that have a higher proportion of independent directors, who contribute to explorative organizational learning, carry out more effective monitoring, and offer independent opinions in strategic decision making, outperform firms with fewer independent board members. To address the endogeneity of board independence, we use the enactment of the Sarbanes-Oxley Act and related changes to the NYSE/NASDAQ listing rules as exogenous shocks; we show that our results are robust to the correction for endogeneity issues. Further, we show that our findings are generalizable to other high tech industries that face significant threats of new entry emerging from fast-moving industry dynamics. However, these results do not extend to slow-moving industries that have a stable market structure and thereby face lower and more homogenous levels of NET. We discuss the implications for future research, and provide managerial guidelines for practice as well.
... The Kappa statistic is 0.71, indicating substantial reliability (Landis & Koch, 1977). Consistent with prior research (Aggarwal, Gopal, Gupta, & Singh, 2012), when the two raters disagreed on the label of a message, a third rater's judgment was used. In our labelled dataset, 937 of the tweets were classified as facts and 1331 were classified as opinions. ...
Massive social media data present businesses with an immense opportunity to extract useful insights. However, social media messages typically consist of both facts and opinions, posing a challenge to analytics applications that focus more on either facts and opinions. Distinguishing facts and opinionss may significantly improve subsequent analytics tasks. In this study, we propose a deep learning-based algorithm that automatically separates facts from opinions in Twitter messages. The algorithm outperformed multiple popular baselines in an experiment we conducted. We further applied the proposed algorithm to track customer complaints and found that it indeed benefits subsequent analytics applications.
... A major reason for countries doing so is that start-ups spur productivity, efficiency (by challenging the incumbent firms), and economic wealth, thereby contributing to a country's overall competitiveness (Cumming et al. 2014). Securing sufficient funding is often the impetus for the entrepreneurs of these start-ups to play a vital economic role (Aggarwal et al. 2012;Zheng et al. 2010). Particularly in the VC context, a start-up's valuation determines how much financing can be raised, since a higher valuation implies a greater amount of funding (e.g., Cumming and Dai 2011;Zheng et al. 2010). ...
Countries increasingly compete to host innovative start-ups to secure and promote economic growth. However, because start-ups seem to be valued differently across countries, both researchers and policymakers must understand the factors determining the variability of early-stage start-up valuations. This study therefore draws on institutional theory and conducts a fuzzy-set qualitative comparative analysis to analyze a sample of 1251 start-up valuations drawn from 13 countries between 2009 and 2016. Our findings show that a common law system together with high levels of innovativeness in a country explain high early-stage start-up valuations. The second configuration leading to high start-up valuations is characterized by favorable cultural circumstances in terms of low levels of uncertainty avoidance and high levels of collectivism, which in combination possibly compensate for a civil law system. Two configurations explaining low start-up valuations are a combination of a lack of innovativeness nationally, and unfavorable informal institutions (i.e., high uncertainty avoidance or low collectivism), regardless of the origins of a nation’s legal system. The last configuration explaining low start-up valuations is a combination of unfavorable informal institutions in terms of high uncertainty avoidance and low collectivism, alongside a civil law system. © 2018, Springer Science+Business Media, LLC, part of Springer Nature.
... Contrary to these findings, however, several studies have shown that purchase decisions are influenced more by negative reviews (e.g., Aggarwal et al. 2012;Chakravarty et al. 2010;Chang and Wu 2014;Cui et al. 2012;Yoo et al. 2013). Hennig-Thurau et al. (2004) claim that negative reviews act as an instrument of power, substantially influencing consumers' perceptions of a company and its brands. ...
Online reviews can strongly influence purchase decisions. In the past decade, extensive research in the field of online reviews has focused on product categories (e.g., hedonic, utilitarian) and product sales. However, research on how the characteristics of online reviews (valence, volume, and variance) influence attitudes toward brands is sparse, even though brands are among the most valuable corporate assets and companies use online marketing extensively to increase brand loyalty. Thus, this paper offers a conceptual model that closely examines the relationship between the characteristics of online reviews and brand attitudes. The model contributes to a better understanding of the influence of contextual factors on brand attitudes within online communication. In line with prior research, the study conceptualizes volume and variance as moderators of valence. Furthermore, the proposed conceptual model integrates brand type (functional, emotional, symbolic, and lifestyle) and the source of review (stranger or acquaintance) as potential moderators. Conceptual insights, along with managerial implications for online marketing managers, are provided.
... A major reason for countries doing so is that start-ups spur productivity, efficiency (by challenging the incumbent firms), and economic wealth, thereby contributing to a country's overall competitiveness (Cumming et al. 2014). Securing sufficient funding is often the impetus for the entrepreneurs of these start-ups to play a vital economic role (Aggarwal et al. 2012;Zheng et al. 2010). Particularly in the VC context, a start-up's valuation determines how much financing can be raised, since a higher valuation implies a greater amount of funding (e.g., Cumming and Dai 2011;Zheng et al. 2010). ...
Combining machine learning with econometric analysis is becoming increasingly prevalent in both research and practice. A common empirical strategy uses predictive modeling techniques to “mine” variables of interest from available data and then includes those variables into an econometric framework to estimate causal effects. However, because the predictions from machine learning models are inevitably imperfect, econometric analyses based on the predicted variables likely suffer from bias due to measurement error. We propose a novel approach to mitigate these biases, leveraging the random forest technique. We propose using random forest not just for prediction but also for generating instrumental variables for bias correction. The random forest algorithm performs best when comprised of a set of trees that are individually accurate in their predictions, yet which also make “different” mistakes, that is, have weakly correlated prediction errors. A key observation is that these properties are closely related to the relevance and exclusion requirements of valid instrumental variables. We design a data-driven procedure to select tuples of individual trees from a random forest, in which one tree serves as the endogenous covariate and the others serve as its instruments. Simulation experiments demonstrate its efficacy in mitigating estimation biases and its superior performance over alternative methods.
History: David Martens served as the senior editor for this article.
Data Ethics & Reproducibility Note: The code capsule is available on Code Ocean at https://codeocean.com/capsule/7039927/tree/v1 and in the e-Companion to this article (available at https://doi.org/10.1287/ijds.2022.0019 ).
El objetivo principal de este artículo es establecer las relaciones bibliométricas entre los términos: eWOM y Proceso de decisión de compra del consumidor, así como sus tendencias y principales indicadores y dimensiones estudiadas en la última década. Se mapeó el desarrollo del área de investigación en términos de la frecuencia de publicaciones y sus citaciones, las revistas o journals y la dispersión geográfica. Se encontró que la relación eWOM y toma de decisiones del consumidor tiene una tendencia creciente hasta 2017, después decrecre y poco se trabajó antes de 2009.
This study examines how destination marketing organization’s (DMO’s) social media posts and comments increase customer engagement and explores the moderating role of information richness in the smart tourism context. To test the proposed hypotheses, the current study employed social media analytics by analyzing unique panel data from 72 DMOs’ Facebook event pages. The research findings indicate that a DMO’s social media efforts (quantitative aspect) are positively associated with customer engagement and DMOs having a higher level of information richness (qualitative aspect) in their messages have greater customer engagement on DMOs’ Facebook event pages. The current study also sheds light on the scant research stream of measuring DMOs’ social media success empirically and presents the possibility of how social media analytics can be applied to hypothesis testing in tourism research instead of traditional research methods.
In this introduction we set the stage for the chapters that make up this book. We have clustered the invited contributions in a manner that should facilitate reader’s understanding of social media within an entrepreneurial context. This volume is not intended to be an exhaustive review of the literature on social media nor is it an extensive review of the role social media plays in entrepreneurial ventures. What it does explore are various aspects of how the social media in the twenty-first century has impacted entrepreneurial behaviors. We hope these chapters will stimulate future research on social media in an entrepreneurship context.
This research examines customer engagement in social media (CESM) using a meta-analytic model of 814 effect sizes across 97 studies involving 161,059 respondents. Findings reveal that customer engagement is driven by satisfaction, positive emotions, and trust, but not by commitment. Satisfaction is a stronger predictor of customer engagement in high (vs. low) convenience, B2B (vs. B2C), and Twitter (vs. Facebook and Blogs). Twitter appears twice as likely as other social media platforms to improve customer engagement via satisfaction and positive emotions. Customer engagement is also found to have substantial value for companies, directly impacting firm performance, behavioral intention, and word-of-mouth. Moreover, hedonic consumption yields nearly three times stronger customer engagement to firm performance effects vis-à-vis utilitarian consumption. However, contrary to conventional managerial wisdom, word-of-mouth does not improve firm performance nor does it mediate customer engagement effects on firm performance. Contributions to customer engagement theory, including an embellishment of the customer engagement mechanics definition, and practical implications for managers are discussed.
Electronic word of mouth (eWoM) messages are increasingly consequential for consumers’ decisions regarding products/services. This has led to a large body of scholarly research on factors affecting eWoM message adoption. Adoption of an eWoM message refers to accepting the information and recommendations contained in an eWoM message, which consequently influence consumers’ cognitive and behavioral tendencies toward pertinent products/services. Notwithstanding the contributions of prior eWoM studies, we observe inconsistent findings across these studies that make a consensus difficult to reach. Lack of consistency is also evident among eWoM service providers in the selection and presentation order of the pertinent factors on their sites. To address this gap, we draw on the heuristic-systematic model in a meta-analytic structural equation modeling study to test a nomological eWoM adoption model that assesses the factors affecting the adoption of an eWoM message. Our meta-analysis of 87 eWoM studies, comprising 105,318 observations, sheds light on eight factors toward eWoM message adoption. Our findings unravel the multitude of ways in which these factors can influence eWoM message adoption and show the relative importance of these factors based on their total effects on eWoM message adoption. This enables the eWoM service providers to enhance the inconsistencies in the selection and presentation order of important factors toward eWoM message adoption on their sites.
Increasingly more investors are seeking information from social media to help make investment decisions. Considering that information on penny stocks is often less reported in traditional media, investors may rely more on social media to obtain such information for investment advice. Although previous research has shown that stock opinions in traditional media is a possible predictor of stock returns, no previous research has considered the effect of the stock opinions in social media on these stocks in terms of future stock performance and the moderation effect of penny stocks. In this research, we studied the relationship between social media and the financial performance of penny stocks. We used the net proportion of positive words in stock articles in social media to help predict the future stock performance for penny stocks. The moderation effect of penny stocks on the net fraction of positive words was found to be significant in short terms, revealing a stronger relationship between social media and stock performance at lower price and market capitalization (MC) levels. Based on the findings, we proposed simple strategies utilizing social media and our measure. The results of our applications will be of interest to individual and institutional investors, shareholders, and regulators.
More than 50 years ago, information technology (IT) began to change society, the economy, and industries worldwide. This change has included waves of technological disruption that have been exploited by entrepreneurial actors who seize the associated new opportunities. Research on related phenomena is spread across different disciplines. Recently, there have been calls for further research on the marriage of IS and entrepreneurship. We review 292 articles in the information systems, entrepreneurship, and general and strategic management literature to create an overview of the IT-associated entrepreneurship research landscape. Based on that review, we elaborate on the different roles that IT can assume in order to support entrepreneurial operations and value creation in these settings. Our findings suggest that IT plays four major roles in entrepreneurial operations: as a facilitator, making the operations of startups easier; as a mediator for new ventures’ operations; as an outcome of entrepreneurial operations; and as a ubiquity, becoming the business model itself. Leveraging these roles of IT, we develop a set of definitions to clear up definition uncertainties surrounding IT-associated new ventures such as digital startups and digital business models. We also outline a research agenda for IT-associated entrepreneurship research based on identified roles, types, and gaps.
Behavioral Change Support Systems (BCSSs) aim to change users’ behavior and lifestyle. These systems have been gaining popularity with the proliferation of wearable devices and recent advances in mobile technologies. In this article, we extend the existing literature by discovering design principles for health BCSSs based on a systematic analysis of users’ feedback. Using mobile diabetes applications as an example of Health BCSSs, we use topic modeling to discover design principles from online user reviews. We demonstrate the importance of the design principles through analyzing their existence in users’ complaints. Overall, the results highlight the necessity of going beyond the techno-centric approach used in current practice and incorporating the social and organizational features into persuasive systems design, as well as integrating with medical devices and other systems in their usage context.
Linear regression is among the most popular statistical models in social sciences research, and researchers in various disciplines use linear probability models (LPMs)—linear regression models applied to a binary outcome. Surprisingly, LPMs are rare in the IS literature, where researchers typically use logit and probit models for binary outcomes. Researchers have examined specific aspects of LPMs’ but not thoroughly evaluated their practical pros and cons for different research goals under different scenarios. We perform an extensive simulation study to evaluate the advantages and dangers of LPMs, especially with respect to big data, which is now common in IS research. We evaluate LPMs for three common uses of binary outcome models: inference and estimation, prediction and classification, and selection bias. We compare its performance to logit and probit under different sample sizes, error distributions, and more. We find that coefficient directions, statistical significance, and marginal effects yield results similar to logit and probit. In addition, LPM estimators are consistent for the true parameters up to a multiplicative scalar. This scalar, although rarely required, can be estimated assuming an appropriate error distribution. For classification and selection bias, LPMs are on par with logit and probit models in terms of class separation and ranking and is a viable alternative in selection models. LPMs are lacking when the predicted probabilities are of interest because predicted probabilities can exceed the unit interval. We illustrate some of these results by modeling price in online auctions using data from eBay.
Now organizations are always vulnerable to the liabilities of newness, but such pressures are especially severe when an industry is in its formative years. We focus on one set of constraints facing entrepreneurs in emerging industries-their relative lack of cognitive and sociopolitical legitimacy. We examine the strategies that founders can pursue, suggesting how their successful pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping industry and institutional environments.
This article synthesizes the large but diverse literature on organizational legitimacy, highlighting similarities and disparities among the leading strategic and institutional approaches. The analysis identifies three primary forms of legitimacy: pragmatic, based on audience self-interest; moral, based on normative approval; and cognitive, based on comprehensibility and taken-for-grantedness. The article then examines strategies for gaining, maintaining, and repairing legitimacy of each type, suggesting both the promises and the pitfalls of such instrumental manipulations.
I describe how board structures influence the decision-making processes that investors use when purchasing shares of firms undertaking initial public offerings (IPOs). IPO firms are relatively unknown to investors and suffer from a liability of market newness. I rely on signaling theory, institutional theory, and sociological research on prestige to suggest that investor perceptions of board prestige signal organizational legitimacy, thereby reducing the liability of market newness and improving IPO firm stock performance. I also propose that the characteristics of investors, namely prestige, influence their perceptions of board prestige.
With the rapid growth of the Internet, the ability of users to create and publish content has created active electronic communities that provide a wealth of product information. However, the high volume of reviews that are typically published for a single product makes harder for individuals as well as manufacturers to locate the best reviews and understand the true underlying quality of a product. In this paper, we reexamine the impact of reviews on economic outcomes like product sales and see how different factors affect social outcomes such as their perceived usefulness. Our approach explores multiple aspects of review text, such as subjectivity levels, various measures of readability and extent of spelling errors to identify important text-based features. In addition, we also examine multiple reviewer-level features such as average usefulness of past reviews and the self-disclosed identity measures of reviewers that are displayed next to a review. Our econometric analysis reveals that the extent of subjectivity, informativeness, readability, and linguistic correctness in reviews matters in influencing sales and perceived usefulness. Reviews that have a mixture of objective, and highly subjective sentences are negatively associated with product sales, compared to reviews that tend to include only subjective or only objective information. However, such reviews are rated more informative (or helpful) by other users. By using Random Forest-based classifiers, we show that we can accurately predict the impact of reviews on sales and their perceived usefulness. We examine the relative importance of the three broad feature categories: “reviewer-related” features, “review subjectivity” features, and “review readability” features, and find that using any of the three feature sets results in a statistically equivalent performance as in the case of using all available features. This paper is the first study that integrates eco- - nometric, text mining, and predictive modeling techniques toward a more complete analysis of the information captured by user-generated online reviews in order to estimate their helpfulness and economic impact.
Framework outlines the decision process in an industrial context.
Signaling theory is useful for describing behavior when two parties (individuals or organizations) have access to different information. Typically, one party, the sender, must choose whether and how to communicate (or signal) that information, and the other party, the receiver, must choose how to interpret the signal. Accordingly, signaling theory holds a prominent position in a variety of management literatures, including strategic management, entrepreneurship, and human resource management. While the use of signaling theory has gained momentum in recent years, its central tenets have become blurred as it has been applied to organizational concerns. The authors, therefore, provide a concise synthesis of the theory and its key concepts, review its use in the management literature, and put forward directions for future research that will encourage scholars to use signaling theory in new ways and to develop more complex formulations and nuanced variations of the theory.
This article examines the influences of firms’ and industries’ legitimacy on the flow of resources into new technology ventures in emerging industries. We first present a model of the determinants of a new technology venture’s legitimacy, which considers its founders, its management team and the media attention it receives. A model of sources of industry legitimacy is developed, with multiple measures of both sociopolitical and cognitive forms of legitimacy.We test our ideas on a sample of 106 initial public offerings from biotechnology ventures during the emergence of the industry between 1981 and 1993. Our results demonstrate the vital role of sociopolitical and cognitive legitimacy at both firm and industry levels in attracting resources for new technology ventures.
This study surveyed Weblog users online to investigate how credible they view blogs as compared to traditional media as well as other online sources. This study also explores the degree to which reliance on Weblogs as well as traditional and online media sources predicts credibility of Weblogs after controlling for demographic and political factors. Weblog users judged blogs as highly credible—more credible than traditional sources. They did, however, rate traditional sources as moderately credible. Weblog users rated blogs higher on depth of information than they did on fairness.
Results of a two-year inductive field study of British ventures show that entrepreneurs are more likely to acquire resources for new ventures if they perform symbolic actions—actions in which the actor displays or tries to draw other people's attention to the meaning of an object or action that goes beyond the object's or action's intrinsic content or functional use. We identify four symbolic action categories that facilitate resource acquisition: conveying the entrepreneur's personal credibility, professional organizing, organizational achievement, and the quality of stakeholder relationships. Our data show that entrepreneurs who perform a variety of symbolic actions from these categories skillfully and frequently obtain more resources than those who do not. Our data also suggest three factors—structural similarity, intrinsic quality, and uncertainty—that moderate the relationship between symbolic management and resource acquisition. We theorize how the various symbolic action categories shape different forms of legitimacy that help entrepreneurs acquire resources.
New organizations are always vulnerable to the liabilities of new- ness, but such pressures are especially severe when an industry is in its formative years. We focus on one set of constraints facing entre- preneurs in emerging industries-their relative lack of cognitive and sociopolitical legitimacy. We examine the strategies that founders can pursue, suggesting how their successful pursuit of legitimacy may evolve from innovative ventures to broader contexts, collectively reshaping industry and institutional environments. Founding a new venture is risky business under any conditions, but especially so when entrepreneurs have few precedents for the kinds of activities they want to found. Early ventures in the formative years of a new industry face a different set of challenges than those that simply carry on a tradition pioneered by thousands of predecessors in the same industry. Such foundings are risky, but are they also foolish? From an institutional and ecological perspective, founders of new ventures appear to be fools, for they are navigating, at best, in an institutional vacuum of indifferent munificence and, at worst, in a hostile environment impervi- ous to individual action. In addition to the normal pressures facing any new organizations, they also must carve out a new market, raise capital from skeptical sources, recruit untrained employees, and cope with other difficulties stemming from their nascent status. Among the many problems facing innovating entrepreneurs, their relative lack of legitimacy is especially critical, as both entrepreneurs and crucial stakeholders may not fully understand the nature of the new ventures, and their conformity to established institutional rules may still be in question. We capture these problems by using the term legitimacy in two related senses: (a) how taken for granted a new form is and (b) the
In this study, the authors examine how national culture affects referral behavior for industrial services such as ad- vertising, banking, and accounting. The authors collected data using interviews with managers of small- and medi- um-sized companies in the United States and Japan. The results show that national culture has a strong effect on the number of referral sources consulted and that Japanese companies use more than comparable American com- panies do. Don't laugh, but all the really important (business) ser- vices I have, I found in the Yellow Pages (American man- ager of a small manufacturing company in the United States). When starting a new business, your bank means every- thing. Just about all my service vendors came from talking with my bank (Japanese owner of a cosmetics manufac- turer in Tokyo).
Examines how the performance of young firms is influenced by their interorganizational exchange networks and whether the prominence of business partners affects the ability to acquire critical resources, particularly capital. The following four hypotheses are posited: (1) the greater the prominence of the strategic alliance partners of a young company, the better the performance of the new venture; (2) the greater the prominence of the organizations that have acquired ownership stakes in a young company, the better the performance of the new venture; (3) the greater the prominence of the investment bank of a young company, the better the performance of the new venture; and (4) the greater the uncertainty about the quality of the company, the larger the impact of the prominence of the firm's exchange partners on its performance. Data used to test these hypotheses were gathered from 301 young, venture-capital-backed biotechnology firms. Results from the empirical analysis provide strong evidence that the characteristics and prominence of organizations affiliated with young firms have a direct affect on performance. Firms launch IPOs faster and the IPOs earn greater market value with reputable partners. In addition, the advantage of having prominent affiliates is contingent on the level of uncertainty about the startup's quality. The greater the uncertainty, the more that outside evaluators depend upon the prominence of affiliates to draw inferences about the firm's quality. It is clearly demonstrated that sponsorship has the capacity to substitute for accomplishment and experience as a basis for young firms' success. However, experience and accomplishments take on added significance for firms that lack notable sponsors. (SFL)
A model of the industrial adoption process forms the conceptual framework for an analysis of the purchase of a machine-tool innovation. This article explores five aspects of the industrial adoption process.
It is important for industrial marketers to gain a high degree of synergy among the various elements of their promotional mix. To that end, the authors investigate the sources of information sought by decision participants during the industrial buying process. They also examine those factors that help determine why certain information sources are used during the procurement decision-making process. The results suggest that industrial marketers should consider seriously the use of communications vehicles to supplement the traditional reliance on the industrial salesperson.
In this study, the authors examine how national culture affects referral behavior for industrial services such as advertising, banking, and accounting. The authors collected data using interviews with managers of small- and medium-sized companies in the United States and Japan. The results show that national culture has a strong effect on the number of referral sources consulted and that Japanese companies use more than comparable American companies do.
This study tests a central proposition of institutional theory, that organizational isomorphism increases organizational legitimacy. Results show that isomorphism in the strategies of commercial banks is related to legitimacy conferred by bank regulators and the media, even in the presence of organizational age, size, and performance.
We analyze how online reviews are used to evaluate the effectiveness of product differentiation strategies based on the theories of hyperdifferentiation and resonance marketing. Hyperdifferentiation says that firms can now produce almost anything that appeals to consumers and they can manage the complexity of the increasingly diverse product portfolios that result. Resonance marketing says that informed consumers will purchase products that they actually truly want. When consumers become more informed, firms that provide highly differentiated products should experience higher growth rates than firms with less differentiated offerings. We construct measures of product positioning based on online ratings and find supportive evidence using sales data from the craft beer industry. In particular, we find that the variance of ratings and the strength of the most positive quartile of reviews play a significant role in determining which new products grow fastest in the market-place. This supports our expectations for resonance marketing.
The article discusses a study that investigates the impact of venture capital backing on the commercialization of technology-based start up companies. The article looks at what extent venture capital-backed start-ups use cooperative commercialization strategies and how that compares to other start-ups. The article states that after analyzing the cooperative activity in 701 start-ups, there is a substantial increase in such activity for venture capital-based firms. The study hypothesizes that venture capitalists differ in reputation and that start-ups affiliated with those with a higher reputation forge more cooperative outcome alliances.
This paper examines the possible impact of venture capital (VC) backing on the commercialization direction of technology-based start-ups by asking: To what extent (if at all) do VC-funded start-ups engage in cooperative commercialization strategies (strategic alliances or technology licensing, or both) relative to a comparable set of start-ups, and with what consequences? To address these questions, I assemble a novel data set that matches firms receiving a federal research and development subsidy through the U.S. Small Business Innovative Research program to VC-funded firms by observable characteristics in five technology-intensive industries. These data allow decoupling of cooperative activity resulting from start-up development via the passage of calendar time from that due to association with VCs. An analysis of the 696 start-ups in the sample (split by an external funding source) suggests substantial boosts in both cooperative activity associated with VC-backed firms and in the likelihood of an initial public offering.
This study empirically evaluates the certification and value-added roles of reputable venture capitalists (VCs). Using a novel sample of entrepreneurial start-ups with multiple financing offers, I analyze financing offers made by competing VCs at the first professional round of start-up funding, holding characteristics of the start-up fixed. Offers made by VCs with a high reputation are three times more likely to be accepted, and high-reputation VCs acquire start-up equity at a 10-14% discount. The evidence suggests that VCs' ''extra-financial" value may be more distinctive than their functionally equivalent financial capital. These extra-financial services can have financial consequences.
This article synthesizes the large but diverse literature on organizational legitimacy, highlighting similarities and disparities among the leading strategic and institutional approaches. The analysis identifies three primary forms of legitimacy: pragmatic, based on audience self-interest; moral, based on normative approval: and cognitive, based on comprehensibility and taken-for-grantedness. The article then examines strategies for gaining, maintaining, and repairing legitimacy of each type, suggesting both the promises and the pitfalls of such instrumental manipulations.
Firms use political strategies when attempting to influence public policy decisions. One common assumption is that firms' political strategies will be less effective if the public policy issue has widespread interest among a large segment of likely voters - a "widely salient" issue. We explore how information and reputation cascades, driven by activists or nongovernmental organizations, cause public policy issues to become widely salient. We then discuss how firms can prevent the occurrence of such wide-spread salience and how they can respond once an issue has become widely salient.
It is important for industrial marketers to gain a high degree of synergy among the various elements of their promotional mix. To that end, the authors investigate the sources of information sought by decision participants during the industrial buying process. They also examine those factors that help determine why certain information sources are used during the procurement decision-making process. The results suggest that industrial marketers should consider seriously the use of communications vehicles to supplement the traditional reliance on the industrial salesperson.
A model of the industrial adoption process forms the conceptual framework for an analysis of the purchase of a machine-tool innovation. This article explores five aspects of the industrial adoption process.
Interviews with industrial buyers failed to identify a significant amount of word-of-mouth communication in industrial markets and suggested a key role for manufacturers' salesmen.
Research conducted in three industrial markets indicates that word-of-mouth communication within firms is an important influence in the later stages of the adoption process. Opinion leaders were found to be more heavily exposed to impersonal sources of information than other buying influentials in the firm.
In this article we argue that (1) legitimacy is an important resource for gaining other resources, (2) such resources are crucial for new venture growth, and (3) legitimacy can be enhanced by the strategic actions of new ventures. We review the impact of legitimacy on new ventures as well as sources of legitimacy for new ventures, present strategies for new ventures to acquire legitimacy, explore the process of building legitimacy in the new venture, and examine the concept of the legitimacy threshold.
With the primary academic emphasis on private consumer oriented marketing, analysts and theoreticians, as well as the teachers of marketing have largely tended to overlook industrial marketing, leaving it to be mentioned in passing, if at all. This rather cavalier attitude overlooks the distinct differences between the two fields, while emphasizing their similarities. The result has been the growth by default of a marketing technology in the industrial field that is often overly pragmatic, misapplied, misunderstood, or any combination of these. Possibly the most unfortunate consequence has been the establishment and perpetuation of a number of myths among industrial management, frequently even including the industrial marketing manager. A few of the most pervasive and damaging of these myths are described below.
This study tests a central proposition of institutional theory, that organizational isomorphism increases organizational legitimacy. Results show that isomorphism in the strategies of commercial banks is related to legitimacy conferred by bank regulators and the media, even in the presence of organizational age, size, and performance.
Reports on an empirical study of the decision to purchase computers in a single firm. States it is a competitive bidding situation with several suppliers attempting to win a contract that eventually reached £3.5 million pounds. Illustrates how the politics of the firm can influence significant purchase decisions and, in particular, how gatekeepers within the firm's buying centre can structure the outcome of purchase decision in line with their position in the political process. Bases the study on a large organisation in England, in the period 1957–1968, with regard to four computer purchase decisions. Concludes that it is clear that the computer suppliers had differential access to the firm's power structure and it was also evident they had differential knowledge of its operation.
The seminal work that led to the "Yale Studies in Attitudes and Communication," reporting a series of experiments on communicator credibility, general persuasibility, role playing, fear arousal, order of presentation, and group norms. Much of the later work in attitude change flows directly from this early volume. Harvard Book List (edited) 1971 #487 (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Consumer-generated media, particularly blogs, can help companies increase the visibility of their products without spending millions of dollars in advertising. Although a number of companies realize the potential of blogs and encourage their employees to blog, a good chunk of them are skeptical about losing control over this new media. Companies fear that employees may write negative things about them and that this may bring significant reputation loss. Overall, companies show mixed response toward negative posts on employee blogs—some companies show complete aversion; others allow some negative posts. Such mixed reactions toward negative posts motivated us to probe for any positive aspects of negative posts. In particular, we investigate the relationship between negative posts and readership of an employee blog.
In contrast to the popular perception, our results reveal a potential positive aspect of negative posts. Our analysis suggests that negative posts act as catalyst and can exponentially increase the readership of employee blogs, suggesting that companies should permit employees to make negative posts. Because employees typically write few negative posts and largely write positive posts, the increase in readership of employee blogs generally should be enough to offset the negative effect of few negative posts. Therefore, not restraining negative posts to increase readership should be a good strategy. This raises a logical question: what should a firm's policy be regarding employee blogging? For exposition, we suggest an analytical framework using our empirical model.
Financial statements are value relevant in public equity markets; this study explores the value relevance of financial statements in private equity markets, especially venture capital markets. Specifically, it investigates the value relevance of financial statement data and non-financial statement information for the pre-initial public offering (IPO) venture capital market and the post-IPO public equity market. Argues that despite differences between the two markets, commonalities underlying firm economics and generally agreed accounting principles (GAAP) combine to form predictable relations between equity values, financial statement data, and nonfinancial statement information. Data on venture capital firm valuation for a total sample of 204 biotechnology firms was obtained from Recombinant Capital, covering 1992-2003. Nonfinancial information was compiled from a variety of sources. Analysis found that in the venture capital market, financial statements are highly value-relevant. The signs/signals of the associations between equity values and financial statement data in the venture capital market are similar to those in the public equity market, even though there are structural differences between them. Also found that as firms mature, the value relevance of financial statements increases; this increase is consistent with the fact that financial statements capture the increasing intensity of assets-in-place relative to future investment options.In contrast, as firms mature, the value relevance of non-financial statement information decreases; this decrease indicates that financial statements and nonfinancial statement information of pre-IPO biotech companies backed by venture capital are information substitutes in valuation, not complements. (TNM)
This study proposes that the choice of exchange partners results from a staged process in which firms first use status to screen potential partners and then use reputation to choose a specific firm within the chosen status bracket. We examine our model in the context of the U.S. audit industry and the choice of new auditors by Arthur Andersen's former clients following its collapse in 2002. We show that accountability to powerful market institutions is an important determinant of the choice of status bracket, whereas reputations for industry expertise and business integrity are important in choosing a particular auditor.
Corporate finance decisions are not made at random, but are usually deliberate decisions by firms or their managers to self-select into their preferred choices. This chapter reviews econometric models of self-s