The Promise of New Ventures' Growth Ambitions in Early-Stage Funding: On the Crossroads between Cheap Talk and Credible Signals

S. Kleinert*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

When entrepreneurs express their ambitions to achieve extraordinary financial growth, it may signal growth potential to early-stage investors. However, as this study proposes, promising overly high growth ambitions might backfire for entrepreneurs-dismissed as cheap talk and even penalized due to investors' credibility concerns. Therefore, entrepreneurs may need to complement their high ambitions with costly signals, such as citing their rich experiences or patents. Such costly signals can serve as credibility buffers and transform high ambitions from cheap talk into credible signals. Two empirical studies, based on campaign data from an equity crowdfunding setting and a conjoint experiment, support these arguments.
Original languageEnglish
Number of pages36
JournalEntrepreneurship Theory and Practice
DOIs
Publication statusE-pub ahead of print - 1 Apr 2023

Keywords

  • growth ambitions
  • signaling theory
  • equity crowdfunding
  • cheap talk
  • early-stage finance
  • ENTREPRENEURSHIP RESEARCH
  • CONJOINT-ANALYSIS
  • RESOURCES
  • PERFORMANCE
  • MANAGEMENT
  • CROWD
  • IPOS
  • MARKET

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