Benjamin L. Hallen

The Origin of the Network Positions of New Organizations: How Entrepreneurs Raise Funds

This dissertation examines the mechanisms by which entrepreneurs successfully raise venture capital. Although there has been substantial research on the benefits of having venture capital, how entrepreneurs successfully raise venture capital has received scant attention. I address this gap using two complementary methodologies. First, I develop hypotheses from two competing theoretical logics, one based on founder network ties and status and the other based on accomplishments, that I statistically test in a study of venture capitalists and corporations investing in 92 Internet security ventures. Second, building on a number of detailed interviews with the entrepreneurs at and investors in nine of these ventures, I induct a theoretical framework describing the actions that entrepreneurs used to successfully raise venture capital. In both portions of the dissertation, I find that there are strategies which allow even relatively unknown and poorly-connected entrepreneurs to successfully raise venture capital. (Note: This is a summary of the dissertation intended for a general audience. Please contact the author for the described working papers.)

The Role of Accelerator Designs in Mitigating Bounded Rationality in New Ventures

Using a nested multiple-case study of participating ventures, directors, and mentors of eight of the original U.S. accelerators, we explore how accelerators’ program designs influence new ventures’ ability to access, interpret, and process the external information needed to survive and grow. Through our inductive process, we illuminate the bounded-rationality challenges that may plague all ventures and entrepreneurs—not just those in accelerators—and identify the particular organizational designs that accelerators use to help address these challenges, which left unabated can result in suboptimal performance or even venture failure. Our analysis revealed three key design choices made by accelerators—(1) whether to space out or concentrate consultations with mentors and customers, (2) whether to foster privacy or transparency between peer ventures participating in the same program, and (3) whether to tailor or standardize the program for each venture—and suggests a particular set of choices is associated with improved venture development. Collectively, our findings provide evidence that bounded rationality challenges new ventures differently than it does established firms. We find that entrepreneurs appear to systematically satisfice prematurely across many decisions and thus broadly benefit from increasing the amount of external information searched, often by reigniting search for problems that they already view as solved. Our study also contributes to research on organizational sponsors by revealing practices that help or hinder new venture development and to emerging research on the lean start-up methodology by suggesting that startups benefit from engaging in deep consultative learning prior to experimentation.

Network Isolates: Entrepreneurial Bootstrapping and the Social Disconnection of New Organizations in the Mobile App Ecosystem

Extensive prior literature has studied how young organizations are impacted by and often benefit from embeddedness in key industry networks. Indeed, some research advises that entrepreneurs “don’t go it alone” (Baum, Calabrese, and Silverman, 2000). This literature has also highlighted a dynamic whereby young organizations with higher quality are most likely to sort into these networks. Yet this perspective often fails to consider the drivers and prevalence of high-quality young organizations not becoming embedded, and instead remaining network isolates. Drawing on resource dependence and exchange theory’s emphasis on network ties arising from mutual and balanced interdependence, we explicate how organizational design decisions, current performance, and competitive pressures influence whether a young organization remains a network isolate. We test and find support for our arguments using an unusually rich, complete, and large “big data” dataset that captures all competitors in the mobile app ecosystem on the Apple iPhone ecosystem over a period of 5 years, showing that a substantial fraction of high-performing mobile app developers remain outside of the venture finance network.

Do Accelerators Accelerate? If So, How? The Impact of Intensive Learning from Others on New Venture Development

A fundamental challenge for new ventures is overcoming liabilities of newness - particularly, lack of relevant knowledge. Accelerators, intense, time-compressed entrepreneurial programs, attempt to alleviate these liabilities by providing ventures with intensive learning. While accelerators have rapidly emerged as prominent players in the entrepreneurial ecosystem, entrepreneurs, policy makers, and other practitioners have continued to raise questions about their efficacy. Mirroring such concerns, extant organizational theories offer competing predictions about whether and for which ventures accelerator participation might be beneficial. Drawing on hybrid empirical methods that triangulate across multiple quantitative and qualitative analyses, we consistently find evidence that many accelerators do indeed aid and accelerate venture development and that their effects are neither due purely to selection or credentialing. Intriguingly, our results also indicate that accelerator participation complements rather than substitutes for many forms of prior founder experience (e.g., having worked for a company that produces a lot of startups). Overall, we contribute by pioneering work on the nature and outcomes of accelerators, offering insight into the fundamental value of intensive indirect learning (vs direct learning) in new ventures and extending understanding of how organizations may speed products and services to market.