Evaluation of Early-Stage Ventures: Coherent Combinations of Experimentation, Planning, and Structure
45 Pages Posted: 29 May 2018 Last revised: 25 Feb 2019
Date Written: April 23, 2018
Scholars have argued that evaluators of early-stage ventures privilege organizational characteristics that signal legitimacy. Yet, legitimacy is institutionally specific, and for early-stage ventures the institutional context is often ambiguous. In this situation, we argue that evaluators will not base their evaluations on individual characteristics but on the coherence among multiple characteristics. We hypothesize that early-stage ventures combining experimental strategy and less formal structure or planning strategy and more formal structure will receive more positive evaluations relative to those choosing alternative combinations. Using a proprietary dataset of venture pitches from a university-based venture competition, we find robust evidence supporting our hypothesis. Additional analysis suggests that the evaluators theoretically more attentive to legitimacy signals are more strongly influenced by coherent combinations, providing evidence for the legitimacy mechanism.
Keywords: Entrepreneurship, Legitimacy, Experimentation, Structure, Venture Competition
JEL Classification: M13, M21
Suggested Citation: Suggested Citation