Crossed Wires: Endorsement Signals and the Effects of IPO Firm Delistings on Venture Capitalists’ Reputations

Gomulya, David M.; Jin, Kyuho; Lee, Peggy M.; Pollock, Timothy G.

doi:10.5465/amj.2016.0796

Cited by 44 publications

(38 citation statements)

References 96 publications

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“…VC firm–level contextual factors provide additional, indirect information to outside investors about the VC firm’s reputation and should not be considered as orthogonal to the performance-centered reputation metrics, since they may perform a role of reputation transfer “enhancers” (Lange et al, 2011: 177). Building on prior studies that have differentiated between various dimensions of reputation (Deephouse & Carter, 2005; Gomulya et al, in press; Lange et al, 2011; Rindova et al, 2005), we argue that VC firms backing a focal IPO have three time-dependent characteristics that serve as reputation transfer enhancers further contributing to the focal IPO firm’s value. These VC firm characteristics include the intensity of the VC firm’s previous IPO deal experience; diversity of the VC firm’s IPO firm age experience, with age being used as a proxy for ex ante uncertainty of a portfolio firm; and the VC firm’s lead syndicate experience.…”

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confidence: 79%

“…Furthermore, researchers, with rare exceptions (e.g., Gomulya et al, in press; Lee et al, 2011; Rindova, Williamson, Petkova, & Sever, 2005), have considered reputation through external linkages as a unidimensional factor largely associated with past performance of the reputable connecting party. However, the basis on which stakeholders perceive reputation depends on more than one specific attribute, such as past performance track record (Rindova et al, 2005).…”

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confidence: 99%

“…We also contribute by adding to emerging approaches that recognize the bidirectional nature of changes to VC firm reputation (Gomulya et al, in press). Prior work associates VC firm reputation with its activity (companies taken public, amount of funds under management, number of start-ups invested in over a specific period).…”

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confidence: 99%

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“Success by Association”: The Impact of Venture Capital Firm Reputation Trend on Initial Public Offering Valuations

Chahine

Filatotchev

Bruton

et al. 2019

Journal of Management

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Organizational theory recognizes reputation as a central element to understanding the firm. Examining investor valuations of 1,676 initial public offerings (IPOs) in the United States from 1990 to 2011, we find that reputation transfer through an association of an IPO firm with a venture capital (VC) firm represents a resource whose value can increase/decrease over time depending on investors’ valuations of prior IPOs funded by a VC firm. We conclude that the impact of reputation transfer through association is not unidirectional but, instead, is to be viewed in the context of prior reputational development of organizations the focal firm is associated with. Furthermore, we find that three “transfer enhancers” can improve the impact of VC firm reputation transfer on IPO valuations, including the VC firm’s past experience intensity, the diversity of IPO experiences, and the number of prior syndicated IPOs involving the VC firm as a lead investor.

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confidence: 79%

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confidence: 99%

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“Success by Association”: The Impact of Venture Capital Firm Reputation Trend on Initial Public Offering Valuations

Chahine

Filatotchev

Bruton

et al. 2019

Journal of Management

View full text Add to dashboard Cite

show abstract

“…Consistent with the categorization theory [25][26][27], results of this research show that when a multi-brand crisis happens, consumer brand trust in a crisis brand category would decrease because of assimilation, while that in a competing brand category would, on the contrary, increase because of a contrast effect. Although the scapegoating effect has been proposed and verified in various research areas [29][30][31][32][33][34], there is only one piece of research exploring consumer scapegoating, and it only considered the scapegoat brand itself [2]. The current research, in comparison, shows that the emergence of a scapegoat brand would bring changes to the post-crisis "destiny" of both a crisis brand category and a competing brand category.…”

Section: Discussionmentioning

confidence: 90%

“…For example, results of one research study show that, stakeholders of delisted IPO (Initial Public Offering) firms would blame the endorsing venture capitalists and thus bring negative effects on those venture capitalists' reputation. [32] Some scholars propose scapegoating as a "strategy" to solve crisis. In order to obtain a post-crisis reputation recovery, companies could pass the responsibility to a scapegoat [33].…”

Section: Scapegoating Effectmentioning

confidence: 99%

Can Companies Survive a Multi-Brand Crisis? Research on Consumer Scapegoating

et al. 2020

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Compared with single-brand crises, multi-brand crises have broader and deeper influence. However, there is only a limited amount of research regarding this field, especially for the phenomenon of consumer scapegoating. This research aims to further explore the consumer scapegoating effect and its psychological mechanism in the context of a multi-brand crisis. Through two experimental studies, this research discusses the influence of a multi-brand crisis and also the emergence of a scapegoat brand on two brand categories, the crisis brand category and the competing brand category. Furthermore, the current research also explores the mechanism of the consumer scapegoating effect. Results show that when a multi-brand crisis happens, consumer brand trust in the crisis brand category decreases because of assimilation, and consumer brand trust in the competing brand category increases because of contrast effect. Besides, from the perspective of the crisis brand category, the emergence of a scapegoat brand could be treated by consumers as a signal that the crisis is over, especially for a severe crisis. Results also support that cognitive dissonance mediates the process that the emergence of a scapegoat brand leads to an increase in consumer brand trust in the crisis brand category and a decrease of consumer brand trust in the competing brand category.

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Public enemies? The differential effects of reputation and celebrity on corporate misconduct scandalization

Han,

Pollock,

Paruchuri

2024

Strategic Management Journal

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Research SummaryWe explore misconduct scandalization's antecedents by focusing on the rational and emotional bases underlying reputation and celebrity, and considering how they can enhance or reduce the likelihood misconduct is scandalized as a function of the misconduct's objective and perceived severity. Specifically, we argue the quantifiable nature of objective misconduct severity enhances reputation's rational influence, but attenuates celebrity's emotion‐based appeal. Conversely, perceived misconduct severity reduces reputation's influence, while enhancing the media‐driven interest in celebrity firms' behaviors. Our findings based on corporate data breaches confirm that objective severity amplifies reputation's effect and attenuates celebrity's effect, while perceived severity amplifies celebrity's effect and attenuates reputation's effect. Our findings highlight the importance of social evaluations' sociocognitive content in understanding why only some misconduct becomes scandalized.Managerial SummaryCommitting misconduct is costly; having it scandalized is devastating. Yet little is known about how social evaluations influence why only some firms' misconduct is scandalized, beyond the vague notion that prominent firms' misconduct attracts media attention. We find that the rational and emotional bases of firms' evaluations matter. High reputation, based on the rational assessment of firms' capabilities, increases the likelihood of scandalization for objectively severe misconduct, and the influence of celebrity—originating from audiences' emotional resonance with firms' unconventional traits and behaviors—weakens as objective severity increases. Conversely, reputation's influence weakens, and celebrity's influence strengthens, as media “availability cascades” grow and increase perceived severity. In addition to providing a more realistic portrayal of media behavior, we offer insights into post‐misconduct communications and remedial actions.

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Crossed Wires: Endorsement Signals and the Effects of IPO Firm Delistings on Venture Capitalists’ Reputations

Cited by 44 publications

References 96 publications

“Success by Association”: The Impact of Venture Capital Firm Reputation Trend on Initial Public Offering Valuations

“Success by Association”: The Impact of Venture Capital Firm Reputation Trend on Initial Public Offering Valuations

Can Companies Survive a Multi-Brand Crisis? Research on Consumer Scapegoating

Public enemies? The differential effects of reputation and celebrity on corporate misconduct scandalization

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