Entrepreneurial identity and strategic disclosure: Founder CEOs and new venture media strategy

Abstract

Research Summary New venture leaders play a key role in crafting media communications to best represent the firm to the outside world. These decisions and behaviors have critical implications for performance. Building on entrepreneurial identity and strategic disclosure research, we explore the interplay between founder CEOs and firm media strategy in their effects on IPO. We use natural language processing and textual analysis on a sample of 76,883 press releases, providing insights into the media communications of founder CEOs of 2,276 US VC backed high‐technology firms during the period from 1985 to 2009. Results suggest that greater volume and use of positive terms in media statements positively mediate the effects of founder CEOs, increasing the likelihood of firm IPO. Our findings offer important contributions to entrepreneurship research. Managerial Summary The purpose of this article is to explore how new venture leaders may influence the external representation of their startups and subsequently impact performance outcomes such as IPO. Specifically, we examine differences between founder CEOs and professional CEOs in how they personally identify with the venture, portray the venture in the media, and thus affect the likelihood of the venture going public, being acquired, or being liquidated. Through analysis of press release statements of VC‐backed high‐technology startups, we find that startups with founder CEOs issue more press release statements, incorporate more positive language in these statements, and have a higher likelihood of IPO than those with professional CEOs. These results imply that the media strategy of founder CEOs may be more beneficial for new ventures.

Who does the media love? A qualitative content analysis of the narratives of founders and nonfounders in IPO firms

“…Prior research has focused on the narrative that companies try to craft for themselves through media strategy (i.e. Petkova et al ., 2013; Howard et al , 2020). Considering that the media itself helps shape a company's narrative, logically, the next step is to investigate how additional sources shape a company's narrative.…”

“…Researching the impact of founders and the media together within the context of an IPO can help further understand how third parties view the narratives about management. Most notably, Howard et al (2020) studied how identity was reflected in the media strategies of management during the IPO process. Howard et al (2020) analyzed firm-released press releases using a textual analysis that denoted tone.…”

“…Most notably, Howard et al (2020) studied how identity was reflected in the media strategies of management during the IPO process. Howard et al (2020) analyzed firm-released press releases using a textual analysis that denoted tone. They used a sample of high-tech ventures in the biopharmaceuticals, communications, medical and semiconductor industries.…”

“…A burgeoning but not extensive stream of research connects founder CEO research to media research on IPOs. For instance, Howard et al . (2020) explored how founders have different media strategies than nonfounders who determine whether a firm goes public or not.…”

“…A deeper look at the portrayal of the relationship between a CEO and their company through media narratives can help understand why founders matter in IPOs. Founder CEOs can bring unique value to the shaping of the narratives provided to external stakeholders that can influence IPO outcomes (Howard et al , 2020). Further understanding the role of founders and the media in IPOs can help reduce uncertainty in the IPO process and can further research on how narratives are constructed by third parties.…”