Choosing between Growth and Glory

45 Pages Posted: 22 Aug 2018

See all articles by Sharon Belenzon

Sharon Belenzon

Duke University; NBER; Duke Innovation & Entrepreneurship Initiative

Aaron Chatterji

Duke University - Fuqua School of Business

Brendan Daley

Johns Hopkins University

Date Written: August 2018

Abstract

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 tradeoff 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 dataset 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.

Suggested Citation

Belenzon, Sharon and Chatterji, Aaron and Daley, Brendan, Choosing between Growth and Glory (August 2018). NBER Working Paper No. w24901, Available at SSRN: https://ssrn.com/abstract=3236704

Sharon Belenzon (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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(1) 617 588 1484 (Phone)

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
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Aaron Chatterji

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Brendan Daley

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

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