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Choosing between growth and glory

Publication ,  Journal Article
Belenzon, S; Chatterji, AK; Daley, B
Published in: Management Science
May 1, 2020

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.

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Published In

Management Science

DOI

EISSN

1526-5501

ISSN

0025-1909

Publication Date

May 1, 2020

Volume

66

Issue

5

Start / End Page

2050 / 2074

Related Subject Headings

  • Operations Research
  • 46 Information and computing sciences
  • 38 Economics
  • 35 Commerce, management, tourism and services
  • 15 Commerce, Management, Tourism and Services
  • 08 Information and Computing Sciences
 

Citation

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Belenzon, S., Chatterji, A. K., & Daley, B. (2020). Choosing between growth and glory. Management Science, 66(5), 2050–2074. https://doi.org/10.1287/mnsc.2019.3296
Belenzon, S., A. K. Chatterji, and B. Daley. “Choosing between growth and glory.” Management Science 66, no. 5 (May 1, 2020): 2050–74. https://doi.org/10.1287/mnsc.2019.3296.
Belenzon S, Chatterji AK, Daley B. Choosing between growth and glory. Management Science. 2020 May 1;66(5):2050–74.
Belenzon, S., et al. “Choosing between growth and glory.” Management Science, vol. 66, no. 5, May 2020, pp. 2050–74. Scopus, doi:10.1287/mnsc.2019.3296.
Belenzon S, Chatterji AK, Daley B. Choosing between growth and glory. Management Science. 2020 May 1;66(5):2050–2074.

Published In

Management Science

DOI

EISSN

1526-5501

ISSN

0025-1909

Publication Date

May 1, 2020

Volume

66

Issue

5

Start / End Page

2050 / 2074

Related Subject Headings

  • Operations Research
  • 46 Information and computing sciences
  • 38 Economics
  • 35 Commerce, management, tourism and services
  • 15 Commerce, Management, Tourism and Services
  • 08 Information and Computing Sciences