IPE Thrust Public Seminar | Rush to fail? Signaling imperative and product recalls in new ventures
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Rush to fail? Signaling imperative and product recalls in new ventures
Abstract:
We develop and introduce signaling imperative to management research. Under high information asymmetry, market participants feel compelled to create a signal in time for a high-stakes transaction, a tendency we conceptualize as signaling imperative. We theorize that signaling imperative drives the signaler to rush signal creation, which can lead to negative consequences long after the transaction is complete. In a study of 2,065 medical devices launched by 284 ventures, products launched prior to initial venture capital (VC) funding displayed a higher likelihood of recall. We attribute this finding to a rush to launch products to obtain VC and confirm our tenet in a randomized experiment, where entrepreneurs in the pre-VC condition decided to rush while feeling the need to signal to potential VC investors. By revealing how organizations accelerate actions to signal, our theory and findings contribute to a more comprehensive understanding of signaling in organizations.
Taiyuan Wang is Associate Professor of Entrepreneurship at CEIBS. Before joining CEIBS, he was Associate Professor of Entrepreneurship at IE Business School in Spain. He teaches Entrepreneurial Management and New Venture Growth at the MBA and EMBA levels, and his research has been published in Academy of Management Journal, Strategic Management Journal, Strategic Entrepreneurship Journal, Research Policy, and Human Relations.