Benjamin C. Powell

Due diligence failure as a signal detection problem

In conducting due diligence during corporate acquisitions, acquirers obtain new and usually negative information regarding targets’ values. Because such information is noisy, acquirers must balance the risk of withdrawing from a value-enhancing acquisition against the risk of persisting with a value-destroying acquisition. Drawing on signal detection theory, a rational choice theory of decision making under uncertainty, we propose that the relative importance acquirers place on these two risks affects how they utilize information obtained during due diligence.To assess this proposition, we undertook an experimental study of decision making in due diligence.The results are consistent with the assertion that the initial value acquirers attach to the acquisition opportunity affects first the impact that negative information from due diligence has on their valuations as well as their final acquisition decisions.

Sales growth of Chinese private owned enterprises (POEs): an exploratory analysis

Purpose – This study aims to provide an exploratory analysis of a broad range of factors that may help to explain the rapid growth of Chinese private owned enterprises (POEs).Design/methodology/approach – The analysis in this study takes advantage of an archival dataset constructed by the third author from proprietary data collected for a practitioner conference in China.Findings – Consistent with research on entrepreneurs in Western economies, the individual characteristics of the Chinese founders showed weak correlations with sales growth, but measures of founder motivation did correlate with sales growth. While the results for company characteristics were also weak, most of the factors related to company governance, strategy, competitive advantage, and stakeholder trust all showed significant correlations with the POEs rates of sales growth.Practical implications – The motivations of Chinese founders appear to matter more than their traits in explaining their ability to grow sales. Solid structure, st...

The Value of Organizational Ambivalence for Small and Medium Size Enterprises in an Uncertain World

Prior literature suggests two competing mechanisms for how organizations respond to environmental forces – absorption and reduction – but there is no consensus on which mechanism is more effective. We solve this puzzle by analysing one underlying dimension of these two mechanisms – organizational ambivalence – in a small and medium size enterprise context. Specifically, we believe that because of the difference in consuming resources, organizational ambivalence can be divided into latent and active, which exhibit different uses in dealing with environmental forces and improving firm performance. We conducted two studies in four countries to test our hypotheses. These two studies yield unanimous support for our hypotheses regarding the impact of organizational ambivalence on organizational performance and mixed support for our hypotheses concerning environmental impacts on organizational ambivalence.

Entrepreneurial intentions and start-ups: Are women or men more likely to enact their intentions?:

While empirical data clearly show that women are underrepresented among entrepreneurs, the causes of this gap are entirely not clear. This article explores one potential cause: that women might be less likely to act on their entrepreneurial intentions. Building on Ajzen’s theory of planned behaviour, we propose that intentions predict start-up behaviours, that is, that there is an intention–behaviour link. We then apply social role theory to propose that the intention–behaviour link is moderated by sex. Analysing data drawn from a sample of US-based management students during their first session in an introductory entrepreneurship course, at the end of the course, on their graduation and at a point up to three years after graduation, we find support for the intention–behaviour link and moderation of this link by sex. We identify additional contributions from our study and implications of our findings for addressing the sex gap in entrepreneurship.