Dmitry Khanin

Coming Forward: The Effects of Social and Regulatory Forces on the Voluntary Restatement of Earnings Subsequent to Wrongdoing

We investigate the effects of social and regulatory forces on a firms decision to disclose past wrongdoing by voluntarily restating its earnings. With an eight-year sample of more than 2,500 public firms, including 170 voluntary restaters, we find that firms are more likely to voluntarily restate their earnings in response to informal social pressures from other firms in their industry and less likely to do so in response to formal regulatory sanctions. We also show that the impact of these forces varies with firm status. We contribute to corporate governance and public policy research that examines the effectiveness of “hard” versus “soft” deterrence measures on firm compliance.

Social Entrepreneurship and Broader Theories: Shedding New Light on the ‘Bigger Picture'

Abstract This article documents the results of a research workshop bringing together six perspectives on social entrepreneurship. The idea was to challenge existing concepts of the economy, the firm, and entrepreneurship in order to shed new light on social entrepreneurship and on our existing theoretical frameworks. The first two contributions use a macro-perspective and discuss the notion of adaptive societies and the tragedies of disharmonization, respectively. Taking a management perspective, the next two focus on the limits of conventional assumptions in management theory, particularly human capital theory and resource-based view. The final two contributions follow an entrepreneurship perspective highlighting the usefulness of mobilization theory and the business model lens to social entrepreneurship. Despite this diversity, all contributions share the fact that they challenge narrow definitions of the unit of analysis in social entrepreneurship; they illustrate the aspect of social embeddedness, and they argue for an open-but-disciplined diversity of theories in social entrepreneurship research.

How to Increase Job Satisfaction and Reduce Turnover Intentions in the Family Firm: The Family–Business Embeddedness Perspective

The authors define family–business embeddedness as confluence of values and objectives stemming from the overlapping institutional contexts—family, business, and symbolic—in the family firm. Hence, the family–business embeddedness perspective investigates the effect of integrating divergent institutional values and objectives, economic and noneconomic, on family firm’s performance. The authors contend that family–business embeddedness and work centrality will magnify family employees’ job satisfaction, whereas superior job alternatives will produce an opposite effect. In turn, job satisfaction will be negatively related to family employees’ turnover intentions. A survey of 111 family employees from 70 family firms in the United States supported the hypotheses.

Conflicts and Regrets in the Venture Capitalist–Entrepreneur Relationship

The goal of this paper is to examine whether conflicts with venture capitalists () could prompt chief executive officers (s) to experience regret of action (regarding their poor partner choice) or regret of inaction (regarding their own inability to avert conflict). We argue that it is important to examine such feelings of regret that could motivate to change their financial intermediation and collaboration strategies in the future. We propose that and may experience two types of conflict: (1) pacing conflicts regarding the direction and speed of venture advancement driven by perceived inequities in economic and social exchange; and (2) prerogative conflicts about the allocation of control rights and relationship issues driven by the perceived inequities in power relations. We hypothesize that pacing conflicts will be related to increasingly intense prerogative conflicts, whereas the latter will be associated with both types of regret. The proposed model is tested with structural equation modeling techniques applied to the data collected from104 of ‐backed ventures. All the hypotheses are supported. Our main finding is that appear to be ambivalent about their conflict with , regretting both their prior choices as an error of judgment (regret of action) and their own lack of initiative (regret of inaction).

Short-termism, long-termism, and regulatory focus in venture capitalists' investment decisions

Short-termism and long-termism are characterized in the literature as suboptimal intertemporal trade-offs defined, respectively, as prioritizing the short term over the long term (to the detriment of the long term) and prioritizing the long term over the short term (to the detriment of the short term). Advancing this perspective, we argue that short-termism and long-termism could be approached as opportunistic strategies utilized by agents to earn private benefits at the principals expense. Venture Capitalists (VCs) may use either of these strategies to take advantage of limited partners and entrepreneurs. How can principals detect opportunistic tendencies on the part of VCs as agents? We argue that the principals can do so by examining the effect of the two suboptimal intertemporal trade-offs on VCs’ investment proclivities. Thus, we contend that short-termism amplifies VCs’ eagerness to invest whereas long-termism magnifies VCs eagerness to provide follow-on investment. Counterintuitively, short-termism may also augment long-termism but only under promotion and not prevention framing. Hierarchical linear modeling analysis of the data from a survey of 50 US-based VCs provided support for all the proposed hypotheses.

Do Venture Capitalists Have a Continuation Bias

Venture capitalists (VCs) follow elaborate procedures to identify the top candidates, out of countless aspiring start-ups, for financing and other types of investor support. Purportedly, VCs also carefully evaluate, based on venture performance, whether or not it deserves to receive follow-on funding. But could decision making biases interfere withthe evaluation process? In this article, we introduce the notion of a continuation bias defined as the proclivity to provide follow-on funding contingent on investor’s earlier investment. We argue that a continuation bias differs from sunk costs, status quo bias and escalation of commitment as it stems from the dual fallacy—information and narcissistic—exaggerating the benefits of greater data availability at later stages of investment and investor’s own contribution to the venture. We also argue that a continuation bias is influenced by contingency factors such that it is more likely to be observed when VCs apply competition-related rather than venture-related investment criteria. A survey of 51 VCs from the US provided support for the hypotheses.

Venture capital-backed foreign portfolio company's IPO

We contend that the likelihood of a new, foreign venture capital (VC) financed venture launching an IPO will be associated with the institutional characteristics of the ventures home country including the national system of innovation and cultural dimensions, such as masculinity and power distance, as well as the commercial potential of its industry segment, and the stage of investment. A hazard model examining a dataset of 485 US VC-backed ventures in the healthcare (biotech and medical) industry operating in 12 countries provided support for our hypotheses.

CEOs’ appraisals of venture capitalists’ external and internal support: a transaction cost economics perspective

Abstract Previous research has established that, in addition to provision of financing, venture capitalists (VCs) may add value to new ventures via different types of management support. In this paper, we propose that transaction cost economics (TCE) may complement other theoretical frameworks (e.g., agency theory, the resource-based view, knowledge-based theory, and resource dependence perspective) in explaining CEOs’ polar and ambivalent appraisals of the benefits and costs of different types of VC support and the overall value of VC assistance. Following TCE, we approach VC-funded new ventures as hybrids of markets and hierarchies. Hence, we assume that VCs help their portfolio companies both to externalize, or learn to better operate under the market mode of governance, and internalize, or learn to better operate under the hierarchy mode of governance. We propose that VCs use external support to facilitate venture externalization and use internal support to facilitate venture internalization. Based on structural equation modeling (SEM) analysis of data from an online survey that generated 104 valid responses from CEOs of VC-funded new ventures, we establish that CEOs associate VCs’ external support positively with the perceived benefits of VC assistance and negatively with the perceived costs of VC assistance. In contrast, CEOs associate VCs’ internal support positively both with the perceived benefits and costs of VC assistance. We also demonstrate that CEOs’ assessments of the perceived benefits and costs of VC assistance are, respectively, associated positively and negatively with their appraisals of the overall value of VC assistance. Finally, we ascertain that CEO experience is related negatively to CEOs’ appraisals of the overall value of VC assistance. Implications of these findings for research and practice are discussed.

Helping Learners Recognize, Diagnose, and Unravel Incompetence Traps to Achieve Synergistic Exploration–Exploitation in Classroom

Sensemaking theory suggests that sensemaking may collapse when perception fails to detect weak signals of changes in the environment, cognition fails to appropriately categorize the new data coming from perception, and action fails to test the applicability of new concepts and schemas. Mindfulness–mindlessness theory warns us that routine practices based on low levels of exploration and exploitation may hinder performance. Finally, the theory of learning failure distinguishes between the traps of failure or overexploration and the traps of success or overexploitation. Combining and advancing these insights, we offer a typology of incompetence traps: (a) underexploration–underexploitation or mindlessness, (b) overexploration–underexploitation, and (c) overexploitation–underexploration. We examine their manifestations in perception, cognition, and action. Based on our analysis of how incompetence traps may hamper learning in management education, we give examples of how instructors may help students achieve synergistic exploration–exploitation via informed vision (combining depth and multiple perspectives); perceptive thinking (combining theoretical, constraint-savvy knowledge and practical, context-savvy knowledge); and mindful action (developing and refining new and existing capabilities).

Problem-solving and incompetence traps in service operations course

Problem-based learning through team projects and case analyses is as much an art as it is a science for business students. As novices, students frequently lack critical-thinking and problem-solving skills and consequently fall into incompetence traps that arise due to defective seeing (tunnel vision vs. blurred vision) and defective thinking (loose vs. oblivious thinking), resulting in fallacies of singularity, multiplicity, constraint neglect and context neglect. We argue that instructors, as experts, should help novice students escape from incompetence traps in a way adjusted to specific knowledge domains. We approach incompetence traps in areas of service operations as triggers of particular operational challenges and propose strategies that will help instructors teach students the art of problem solving and enhance their critical-thinking skills in business education.