Specialists, Generalists, or Both? Founders’ Multidimensional Breadth of Experience and Entrepreneurial Ventures’ Fundraising at IPO

Vangelis Souitaris (), Bo Peng (), Stefania Zerbinati () and Dean A. Shepherd ()
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Vangelis Souitaris: Bayes Business School, City, University of London, London EC1Y 8TZ, United Kingdom; University of St. Gallen, CH-9000 St. Gallen, Switzerland
Bo Peng: Birkbeck, University of London, London WC1E 7HX, United Kingdom
Stefania Zerbinati: Bayes Business School, City, University of London, London EC1Y 8TZ, United Kingdom
Dean A. Shepherd: Mendoza College of Business, University of Notre Dame, South Bend, Indiana 46556

Organization Science, 2023, vol. 34, issue 2, 557-588

Abstract: Different streams of research have led to contradictory conclusions about the venture performance implications of founders’ breadth of experience. Although extant empirical studies have explored the performance implications of founders’ breadth of experience at the start-up stage, we focus on the later stage of the initial public offering (IPO). We theorize that investors categorize venture founders based on two salient dimensions—their industry and functional background—and we relate this categorization to resource acquisition at IPO. To test our model, we use a hand-collected data set of 175 entrepreneurial IPOs in the Alternative Investment Market in London (2002–2013) and two randomized experiments. We theorize and find that compared with entrepreneurial ventures with a lead founder specializing in one industry or one function, investors generally devalue those with a category-spanning lead founder (a generalist). However, devaluation is less severe when a lead founder is a generalist in one dimension (e.g., industry) but a specialist in the other dimension (e.g., function). We also theorize and empirically test trust as a mechanism for the generalist penalty. Specifically, audience members (investors) have low trust in a generalist producer (founder) in contexts where the two parties consider entering into a partnership (equity investment at IPO), and so that generalist producer is devalued. Finally, we show that an external expert endorsement—in our case, from intensive venture capital affiliations—offsets the generalist penalty, especially when category spanning occurs in multiple category dimensions.

Keywords: entrepreneurship; social categories; trust (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:34:y:2023:i:2:p:557-588

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