Do Disruptive Visions Pay Off? The Impact of Disruptive Entrepreneurial Visions on Venture Funding

40 Pages Posted: 6 Feb 2019

See all articles by Timo van Balen

Timo van Balen

Erasmus University Rotterdam (EUR) - Department of Technology and Operations Management

Murat Tarakci

Erasmus Research Institute of Management (ERIM)

Ashish Sood

University of California Riverside

Date Written: March 2019

Abstract

Entrepreneurs often articulate a vision for their venture that purports to fundamentally change, disturb, or re‐order the ways in which organizations, markets, and ecosystems operate. We call these visions disruptivevisions. Neglected in both the disruption and the impression management literature, disruptive visions are widespread in business practice. We integrate real options and impression management theories to hypothesize that articulating a disruptive vision increases the likelihood of the venture receiving funding but reduces the amount of funding obtained. A novel dataset of Israeli start‐ups shows that a standard deviation increase in disruptive vision communication increases the odds of receiving a first round of funding by 22 per cent, but reduces amounts of funds received by 24 per cent. A randomized online experiment corroborates these findings and further demonstrates that the expectation of extraordinary returns is the key mechanism driving investors’ sensemaking.

Keywords: disruption, disruptive vision, entrepreneur, impression management, venture funding, vision communication

Suggested Citation

van Balen, Timo and Tarakci, Murat and Sood, Ashish, Do Disruptive Visions Pay Off? The Impact of Disruptive Entrepreneurial Visions on Venture Funding (March 2019). Journal of Management Studies, Vol. 56, Issue 2, pp. 303-342, 2019, Available at SSRN: https://ssrn.com/abstract=3329492 or http://dx.doi.org/10.1111/joms.12390

Timo Van Balen (Contact Author)

Erasmus University Rotterdam (EUR) - Department of Technology and Operations Management ( email )

RSM Erasmus University
PO Box 1738
3000 DR Rotterdam
Netherlands

Murat Tarakci

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Ashish Sood

University of California Riverside ( email )

United States
6782059931 (Phone)

HOME PAGE: http://www.ashishsood.net

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