Choosing Between Growth and Glory

Sharon Belenzon (), Aaron K. Chatterji () and Brendan Daley
Additional contact information
Sharon Belenzon: Duke University, Durham, North Carolina 27708; National Bureau of Economic Research, Cambridge, Massachusetts 02138;
Aaron K. Chatterji: Duke University, Durham, North Carolina 27708; National Bureau of Economic Research, Cambridge, Massachusetts 02138;

Management Science, 2020, vol. 66, issue 5, 2050-2074

Abstract: Prior work has established that the financing environment can impact firm strategy. We argue that this influence can shape the earliest strategic choices of a new venture by creating a potential trade-off between two objectives: rapid growth and reaping the benefits of a positive reputation (glory). We leverage a simple reputation-building strategic choice—naming the firm after the founder (eponymy)—that is associated with superior profitability. Next, we argue via a formal model that the availability of/dependence on external financing can explain why high-growth firms are rarely eponymous. We find empirical support for the model’s predictions using a large data set of 1 million European firms. Eponymous firms grow considerably more slowly than similarly profitable firms. Moreover, eponymy varies in accordance with the firm’s financing environment in a pattern consistent with our model. We discuss implications for the literature on new-venture strategy.

Keywords: new-venture strategy; entrepreneurship; firm growth; signalling; eponymy (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2019.3296 (application/pdf)

Related works:
Working Paper: Choosing between Growth and Glory (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:66:y:2020:i:5:p:2050-2074

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().