Do Disruptive Visions Pay Off? The Impact of Disruptive Entrepreneurial Visions on Venture Funding

Timo van Balen*, Murat Tarakci, Ashish Sood

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Entrepreneurs often articulate a vision for their venture that purports to fundamentally change, disturb, or re-order the ways in which organizations, markets, and ecosystems operate. We call these visions disruptivevisions. Neglected in both the disruption and the impression management literature, disruptive visions are widespread in business practice. We integrate real options and impression management theories to hypothesize that articulating a disruptive vision increases the likelihood of the venture receiving funding but reduces the amount of funding obtained. A novel dataset of Israeli start-ups shows that a standard deviation increase in disruptive vision communication increases the odds of receiving a first round of funding by 22 per cent, but reduces amounts of funds received by 24 per cent. A randomized online experiment corroborates these findings and further demonstrates that the expectation of extraordinary returns is the key mechanism driving investors' sensemaking.
Original languageEnglish
Pages (from-to)303-342
Number of pages40
JournalJournal of Management Studies
Volume56
Issue number2
DOIs
Publication statusPublished - Mar 2019
Externally publishedYes

Keywords

  • Disruption
  • Disruptive vision
  • Entrepreneur
  • Impression management
  • Venture funding
  • Vision communication

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