Marc Junkunc

The Social Construction of Legitimacy Through Signaling Social Capital: Exploring the Conditional Value of Alliances and Underwriters at IPO

Focusing on a firms signaling of social capital through their alliances, we explore how socially constructed signals convey legitimacy and enable greater initial public offering (IPO) proceeds. We examine the concepts of absolute and relative social capital signals with a sample of 266 biotechnology IPOs from 1980 through 2006. Leveraging a dynamic framework, we uncover that the interpretations of quality signals vary over time and are nonadditive; rather, affiliating with prestigious underwriters limits the positive reward of signaling alliance–based social capital. These relationships vary according to whether social capital is evaluated relative to the industry norms and according to the alliances vertical position.

Navigating Political Hazard Risks and Legal System Quality: Venture Capital Investments in Latin America

With emphasis on a venture’s institutional environment and its stage of development, the authors develop theory to explain how the quality of a nation’s legal system and the level of political hazards affect venture capital (VC) investment strategies in developing countries. The data set consists of 433 VC investment transaction rounds occurring in 13 Latin American countries over the period 1995 to 2003. Different from previous research on the likelihood of investment occurrence, the authors consider the size of an investment transaction as a dependent variable. The authors find a negative relationship between investment size and the political hazards risk and that larger investments are associated with ventures operating in lower quality legal systems. The authors also propose the moderating role of these institutional dimensions in the relationship between a venture’s stage of development and investment size. Findings indicate that in lower quality legal systems, conventional VC-staging strategies are not apparent, where middle and later stage ventures receive the largest investments, but with improvements to the legal system, increasingly larger investments go to early stage ventures. Regarding the stage interaction with political hazards, the authors find that the positive relationship between the venture’s stage of development and investment size weakens as the level of political hazards increases, and when political hazards are high, conventional VC-staging similarly does not occur. In uncovering the unique impact of these institutional dimensions with respect to developing country entrepreneurship, these findings shed light on the acute challenges faced by developing country ventures seeking VC funding at varying stages of development.

Technical Specialized Knowledge and Secondary Shares in Initial Public Offerings

This paper utilizes an understudied but often utilized aspect of initial public offerings (IPOs), secondary shares, to examine whether the knowledge conditions of firms give rise to agency problems that limit the ability of founders and venture capitalists to sell equity at IPO. In an analysis of 2,190 IPOs spanning from 1992 through 2002, we find that private owners are less likely to be observed selling their equity at IPO in ventures that are highly dependent on technical specialized knowledge as measured by the count of individuals with Ph.D.s in the top management team and board of directors. However, we find that this limit on the financial liquidity of founders and venture capitalists is alleviated when the ventures output has received greater market acceptance. Hence, the findings suggest that the financial liquidity of individuals involved in entrepreneurship is likely to be influenced by the knowledge conditions of their venture.

Private Equity Investments in Emerging Markets, National Governance, and Geographic Distance: The Case of Latin America, 1996–2009

The high level of economic growth that emerging markets are experiencing lately — including Latin America — offers new opportunities for different types of investments. Private equity (PE) investments in emerging markets have risen from

How private enterprises respond to government bureaucracy in emerging economies: the effects of entrepreneurial type and governance

3 billion in 2003 to almost

Managing radical innovation: The importance of specialized knowledge in the biotech revolution

70 billion before the Great Recession of 2008–2009 (Emerging Markets Private Equity Association, 2010). In the case of Latin America, PE investments totalled more than

Entrepreneurial pioneer of international venturing. The case of Huawei.

7 billion in 2010 (LAVCA, 2011). By private equity we mean “financing for early- and later-stage private companies from third-party investors seeking high returns based on both the risk profiles of the companies and the near-term illiquidity of these investments” (Leeds & Sunderland, 2003: 8). For instance, venture capital (VC) is a type of private equity focused on start-ups.