Timothy G. Pollock

Media Legitimation Effects in the Market for Initial Public Offerings

In this study, we argue that media-provided information affects investors’ impressions of newly public firms. In 225 initial public offerings (IPOs), the volume of mediaprovided information had a negative, diminishing relationship with underpricing and a positive, diminishing relationship with stock turnover on the first day of trading. The relationship between the tenor of media-provided information and underpricing increases at a nonlinear rate, and decreases similarly for turnover. Findings provide important evidence that publicly available information not only reflects IPOs’ legitimacy, but also adds to their legitimacy and influences investor behavior. In the last 20 years, an increasing amount of research on markets has been conducted from a social constructionist perspective, emphasizing how social structures enhance the flow of useful and credible information that market participants use to reduce the uncertainty of market exchanges (e.g., Aldrich & Fiol, 1994; Zuckerman, 1999). Further, recent organizational research has begun to stress the influence of information intermediaries, such as financial analysts and the media, on mar

Effects of Social Capital and Power on Surviving Transformational Change: The Case of Initial Public Offerings

We examined how social capital and the power of venture capitalists and founderCEOs affect IPO firm survival. Using data from 218 U.S. initial public offerings conducted in 1992, we found that average management team tenure and an IPO deal’s network embeddedness decreased the likelihood of failure during a firm’s first five years as a public entity. Founder-CEO presence at the time of an IPO interacted with CEO ownership to decrease the likelihood of failure, and CEO ownership and venture capitalist ownership concentration also decreased that likelihood. Evolutionary perspectives on organizations are often accompanied by the presumption that organizations face an increased risk of failure early in their lives owing to liabilities of newness (Aldrich, 1999; Stinchcombe, 1965). As organizational goals and patterns of activity become routinized over time, increased reliability in performance and accountability for actions taken enhance a firm’s survival chances (Hannan & Freeman, 1984). This process, however, also generates strong inertial pressures that not only discourage organizational change, but also, because of the potential for disruption to existing internal and external routines, make change hazardous. Research findings suggest that even in older, better-established firms, significant transformational events during their life cycles can effectively “reset the clock” and reintroduce risks associated with the liability of newness as firms struggle to adapt strategies, internal operational and administrative processes, and/or external ties and relationships (Amburgey, Kelly, & Barnett, 1993). Thus, transformational change in organizational operations decreases efficiency and increases failure rates, at least in the short term, as resources and attention are diverted from normal, routinized operating functions to processes involving adaptation and reorientation (Haveman, 1992).

The contingent value of venture capitalist reputation

This study explores the signaling and substantive value of high-reputation affiliates to young firms, and the factors that moderate the nature of the value they provide. Specifically, the study examines the extent to which venture capitalist (VC) reputation is related to the first-day valuation and post-IPO operating performance of the firms they take public, and whether the value of a high-reputation VC is contingent on the timing of VC involvement in the portfolio firm, the VC firms’ industry-specific experience and their geographic proximity. The authors develop a time-varying, multi-item composite index of VC reputation and use a sample of VC-backed IPOs between 1990 and 2000 to test their hypotheses. The results suggest that early involvement in an IPO firm’s development significantly enhances the positive relationship between a VC’s reputation and both initial market reactions and post-IPO operating performance. The study also finds that the industry specialization of early-round VCs, regardless of their reputation, is positively related to post-IPO operating performance, and that the relationship is even stronger when the VC has a high reputation and invests in the first round. Finally, while the geographic proximity of VCs to their portfolio firms has no effect on the relationship between their reputation and the firm’s post-IPO operating performance, investors nonetheless discount the value of VC reputation when VCs are more geographically distant from their portfolio firm. However, when endogeneity associated with having greater access to high-potential start-ups is controlled for, geographic proximity significantly decreases the relationship between VC reputation and operating performance, but it no longer affects initial market valuation.

Making the marriage work: the benefits of strategy's takeover of entrepreneurship for strategic organization:

It appears to us that strategy is succeeding in its takeover of the academic field of entrepreneurship. It is doing this by acquiring entrepreneurship’s most important assets ‐ faculty members. Of the entrepreneurship division’s 2035 members, 1000 (49.1 percent) are also members of the Business Policy and Strategy (BPS) division. Further, a recent glance at the Academy of Management postings for entrepreneurship positions found that of the 157 job postings, about two-thirds also listed strategy as a teaching preference. Of these, strategy was listed before

The benefits and costs of underwriters’ social capital in the US initial public offerings market

This study explores the factors that influence the degree to which brokers in mediated markets employ their social capital to benefit either buyers or sellers in the context of underwriters’ involvement in the US initial public offerings (IPO) market. This study finds that the embeddedness of the lead underwriter with institutional investors in an IPO deal network is negatively associated with IPO stock underpricing when demand for the offering is low, thereby benefiting the seller, but is positively associated with the amount of underpricing when demand for the IPO is high, thereby benefiting the buyers. High underwriter embeddedness with institutional investors also reduces the negative relationship between underwriters’ reputation and underpricing.

(Un)Tangled: Exploring the Asymmetric Coevolution of New Venture Capital Firms' Reputation and Status

We explore the relationship between status and reputation, examining how its dynamics change over time as these two intangible assets coevolve and how reputation and status are influenced by participation in highly visible events. Using a sample of more than 400 newly founded venture capital (VC) firms, we find that reputation and status positively influence each other but that reputation has a greater effect on status, particularly when firms are older. We also find that the effect of past status on current status weakens as VC firms age, but the relationship between past and current reputation remains consistent with age. Furthermore, our findings show that participating in big hits—blockbuster initial public offerings—has a positive relationship with status when firms are young and a positive relationship with reputation when firms are older, and it helps low-status and low-reputation firms more than it helps high-status and high-reputation firms. This study helps differentiate status and reputation, shows how they coevolve, and provides insight into how new firms build these important intangible assets.

Who's the new kid? The process of developing centrality in venture capitalist deal networks

In this chapter we examine the process by which new firms become central actors within their industry networks. We focus, in particular, on how relatively new venture capital (VC) firms become more central within investment syndication networks. We present a model that captures the relationships among (1) the social capital and status of the new VC firms founders, (2) the VC firms resource endowments, (3) the VC firms ability to forge relationships with other prestigious and central venture capital firms, (4) the visibility-enhancing performance of portfolio firms, and (5) the urgency and effort exhibited by the new VC as it pursues these opportunities. These factors combine to shape a new VCs journey from the periphery to the center of its industry network. To illustrate these processes, we develop in-depth case studies of Benchmark Capital and August Capital, two VC firms founded in 1995. We then elaborate upon the enacted nature of resource and opportunity constraints and conclude with a discussion of how new firms create their own self-fulfilling prophecies.

WINNING AN UNFAIR GAME: HOW A RESOURCE-CONSTRAINED PLAYER USES BRICOLAGE TO MANEUVER FOR ADVANTAGE IN A HIGHLY INSTITUTIONALIZED FIELD

In this study we examine how resource-constrained organizations can maneuver for competitive advantage in highly institutionalized fields. Unlike studies of institutional entrepreneurship, we investigate competitive maneuvering by an organization that is unable to alter either the regulative or normative institutions that characterize its field. Using the ‘‘Moneyball’’ phenomenon and recent changes in Major League Baseball as the basis for an intensive case study of entrepreneurial actions taken by the Oakland A’s, we found that the A’s were able to maneuver for advantage by using bricolage and refusing to enact baseball’s cognitive institutions, and that they continued succeeding despite ongoing resource

Falling stars: celebrity, infamy, and the fall from (and return to) grace

Celebrity firms are firms that attract a high level of public attention and generate positive affective responses from stakeholder audiences (Rindova, Pollock, and Hayward 2006). Recent research has explored how and why firms become celebrities (Rindova et al. 2006; Zavyalova and Pfarrer 2015) and how celebrity creates value for firms (Pfarrer, Pollock, and Rindova 2010). Celebrity firms are more likely to have unexpectedly high performance – and gain additional benefits when they do so – while suffering fewer penalties when their performance is lower than expected (Pfarrer et al. 2010). Rindova and colleagues have also argued that firms can engender “infamy,” which results from generating a high level of public attention and negative affective responses from stakeholder audiences. Central to both celebrity and infamy is that firms must engage in “deviant” or non-conforming behaviors. When viewed positively, these behaviors create a “rebel” celebrity persona attractive to at least some stakeholders; however, if the non-conforming behaviors are viewed negatively they can lead to an “outlaw” persona that at a minimum results in a loss of celebrity and possibly increases infamy. Although researchers have begun to explore the causes and consequences of firm celebrity, little research (for a recent exception, see Zavyalova and Pfarrer [2015]) has considered how firms become infamous. Building on Rindova and colleagues (2006), Zavyalova and Pfarrer (2015) argued that celebrity occurs through audience members’ identification with a firms values and beliefs as presented in media-created narratives, and that infamy results from dis-identification with the organizations values and beliefs. Because firms face a plethora of stakeholder audiences with differing priorities and values, they further argued that the same firm can possess both celebrity and infamy simultaneously, as the same set of organizational values and beliefs can be the cause for identification with the firm by one stakeholder audience and dis-identification by another. Consequently, firms can lose celebrity in their quest to maintain it by eventually engaging in behaviors or revealing information that is inconsistent with audience members’ bases for identification. Fundamental to the process of becoming infamous is the belief by a stakeholder group or groups that the firm is engaging in deviant behaviors that they consider wrongdoing.

DOES NOBLESSE OBLIGE? THE EFFECTS OF FIRM REPUTATION AND CELEBRITY ON EARNINGS SURPRISES AND INVESTORS' REACTIONS.

We examine the effects of firm reputation and celebrity on 1) the likelihood that a firm generates a positive or negative earnings surprise and 2) how investors react to positive and negative surprises when they occur. We find that firms endowed with high reputation and celebrity status receive greater market rewards for positive surprises and fewer market penalties for negative surprises relative to firms that do not possess these intangible assets. In addition, the market reacts more positively to positive surprises by celebrity firms than to positive surprises by high reputation firms. We contribute to organizational research and management practice by highlighting how a firms specific endowment of intangible assets can lead to the possibility of non-conforming behavior and generate asymmetric evaluations of this behavior in the marketplace.