Choosing between growth and glory

Published

Journal Article

Copyright: © 2019 INFORMS Prior work has established that the financing environment can impact firm strategy. We argue that this influence can shape the earliest strategic choices of a new venture by creating a potential trade-off between two objectives: rapid growth and reaping the benefits of a positive reputation (glory). We leverage a simple reputation-building strategic choice-naming the firm after the founder (eponymy)-that is associated with superior profitability. Next, we argue via a formal model that the availability of/dependence on external financing can explain why high-growth firms are rarely eponymous. We find empirical support for the model's predictions using a large data set of 1 million European firms. Eponymous firms grow considerably more slowly than similarly profitable firms. Moreover, eponymy varies in accordance with the firm's financing environment in a pattern consistent with our model. We discuss implications for the literature on new-venture strategy.

Full Text

Duke Authors

Cited Authors

  • Belenzon, S; Chatterji, AK; Daley, B

Published Date

  • May 1, 2020

Published In

Volume / Issue

  • 66 / 5

Start / End Page

  • 2050 - 2074

Electronic International Standard Serial Number (EISSN)

  • 1526-5501

International Standard Serial Number (ISSN)

  • 0025-1909

Digital Object Identifier (DOI)

  • 10.1287/mnsc.2019.3296

Citation Source

  • Scopus