How much prestige is enough? Assessing the value of multiple types of high-status affiliates for young firms

Timothy G. Pollock, Guoli Chen, Eric M. Jackson, Donald C. Hambrick

Research output: Contribution to journalArticle

129 Scopus citations

Abstract

Young, unproven firms can signal their worthiness, or potential, through affiliations with various types of prestigious parties. Drawing from signaling theory, we present a formal consideration of the implications of multiple numbers and types of prestigious affiliates for IPO valuations. We argue that different types of prestigious affiliates - prestigious executives, directors, venture capital firms, and underwriters - convey different signals of IPO worth, depending on the extent to which they provide certification or substantive benefits. Based on a sample of 257 software IPOs, we find considerable support for our expectations. The benefits of prestigious executives and directors accumulate in a linear, more is better fashion; in contrast, the payoffs from VC and underwriter prestige accumulate in a curvilinear fashion. We discuss the theoretical implications of these findings and propose an agenda for future research.

Original languageEnglish (US)
Pages (from-to)6-23
Number of pages18
JournalJournal of Business Venturing
Volume25
Issue number1
DOIs
StatePublished - Jan 1 2010

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Management of Technology and Innovation

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