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

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.

(No) Time for Change: When and Why Entrepreneurs Act During Underperforming Fundraising Attempts

“…In line with previous research on resource mobilization (e.g., Clough et al 2019, Souitaris et al 2023, we use the term "fundraising" to refer to "financial resource mobilization." 2 We also draw on general entrepreneurship research because it covers entrepreneurial action research (e.g., Townsend et al 2018), and thus provides theory to understand how entrepreneurs act under the uncertainty inherent to fundraising attempts, which the more-specific entrepreneurial resource mobilization research has rarely studied.…”

On the Edge of Destruction: An Impaired-Regulation Model of Destructive Entrepreneurial Action

“…Sometimes, taking on these many and varied roles (throughout their ventures' development and over a day [Mathias & Williams, 2017]) seems like the only option for entrepreneurs as they cannot afford to hire others. However, it often appears to be a choice as jack-of-all-trades entrepreneurs are more inclined to rely on their own work and skills than to delegate roles to specialist employees even as their organizations grow (Souitaris et al, 2022).…”

“…The attentional load is particularly high in entrepreneurs who adopt a jack-of-all-trades approach to venturing (Åstebro & Thompson, 2011: 637;Lazear, 2005). Jack-of-all-trades entrepreneurs are generalists who make decisions on various tasks (Åstebro & Thompson, 2011;Lazear, 2005;Souitaris, Peng, Zerbinati, & Shepherd, ) instead of hiring managers or employees to delegate decision making to such as specialist entrepreneurs (and managers of established organizations). Jack-of-all-trades entrepreneurs multitask "across a wide range of duties, such as fundraising, operations, human resource management, customer and supplier relations, etc."…”