Past research has shown that new firms can facilitate resource mobilization by signaling their unobservable quality to prospective resource providers. However, we know less about situations in which firms convey multiple signals of different strengths—that is, signals that are more- or less-correlated with unobservable firm quality. Building on a sociocognitive perspective, we propose that prospective resource providers respond differently to signals of different strengths and that the effectiveness of signals, especially weak signals, will be contingent on the media attention new firms receive. Empirically, we conduct a longitudinal analysis examining the ability of new private equity firms to raise a follow-on fund. Consistent with our theory, we find that unrealized performance, a relatively weak signal, positively influences fundraising. However, we fail to find statistical evidence that its effect is weaker than that of realized performance, a relatively strong signal. Further, media attention strengthens the relationship between unrealized performance and fundraising, but media attention exerts less impact on the relationship between realized performance and fundraising. Taken together, our findings deepen our understanding of how new firms can mobilize resources with signals of different strengths and of how the media—as a key information intermediary—differently impacts their effectiveness.
Bibliographical noteFunding Information:
We thank the editor and three anonymous AMJ reviewers for their excellent feedback. Prior drafts of this paper benefited from presentations at the Academy of Management Conference, the Babson College Entrepreneurship Research Conference and the 3rd Entrepreneurial Finance Conference. We further thank Maw Der Foo, Benjamin Hammer, Andrew Winton, and seminar participants at Erasmus University Rotterdam, Maastricht University, SKEMA Business School, Technical University of Munich, University of Bergamo and University of St. Gallen for constructive feedback on prior drafts of this paper. We also thank Preqin for granting access to their database and providing additional information. The research was supported by the Richard M. Schulze Family Foundation.
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