Abstract

New ventures strive for institutional legitimacy. Signaling milestones helps these ventures achieve legitimacy as well as reduce information asymmetry with potential partners, such as investors. The current study creates a matched sample of successful and failed venture capital backed companies. The research examines media citations, both company directed (such as press releases) and independent, to see whether successful ventures differ from failed ones in the pattern of media. The results find that successful ventures have more media citations, more headlines mentioning the company, more unique publications providing them coverage, and higher growth rates in media attention than do failed ventures. Moreover, successful companies put out more company directed media than do failed ventures. Finally, while the tone of the media is predominantly positive for both successful and failed companies, successful ventures actually have a higher percentage of negative tone publications than do failed ventures. The implication of this study for entrepreneurs is that they need to actively signal their successes to create awareness and improve their institutional legitimacy. For investors, studying media citations can be another useful, low-cost tool in assessing a company’s potential.

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