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http://ssrn.com/abstract=2191146
 
 

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When to Be a Nonconformist Entrepreneur? Organizational Responses to Vital Events


Elizabeth G. Pontikes


University of Chicago - Booth School of Business

William P. Barnett


Stanford Graduate School of Business

September 1, 2012

Chicago Booth Research Paper No. 12-59

Abstract:     
Salient successes and failures among organizations, such as spectacular venture capital investments or agonizing bankruptcies, affect consensus beliefs about the viability of particular markets. We argue that such vital events lead to over-reactions in the organizational entry process, with new firms flooding the market after salient successes and a dearth of entries after salient failures. Particularly notable are the implications of nonconformity under these conditions. An entrepreneur who bucks the consensus and enters a market after salient failures must endure considerable scrutiny, and so is likely have a strong fit to that market. Such a nonconformist will be spared from a passing fad, whereas an entrepreneur that follows trends is more likely to enter markets that are not a good fit for the organization. So we propose that in the wake of salient vital events nonconformity is a preferable approach. We find support for this idea in an analysis of software firms: Organizations that enter a software “market space” after salient bankruptcies are especially likely to remain, while those that enter a space after high-profile venture capital funding events are especially likely to leave.

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Date posted: January 20, 2013  

Suggested Citation

Pontikes, Elizabeth G. and Barnett, William P., When to Be a Nonconformist Entrepreneur? Organizational Responses to Vital Events (September 1, 2012). Chicago Booth Research Paper No. 12-59. Available at SSRN: http://ssrn.com/abstract=2191146 or http://dx.doi.org/10.2139/ssrn.2191146

Contact Information

Elizabeth G. Pontikes (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
William P. Barnett
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

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