The Role of Information Signals in Venture Investments and Performance

This dissertation aims to provide theoretical and empirical evidence on which information signals can explain venture investments and performance. The first two studies are empirical, employing film industry as the ideal setting to support the theoretical framework. A film is considered a new venture (project-based), film producer and director are considered the core members of the new venture founding team (VFT), film’s script represents the new venture’s business idea and the distributor represents an intermediary that legitimates the VFT in the market. The first study explains how investors decrease new venture “liability of newness” through two main signals: the VFT reputation and the socio-political legitimacy of the new venture idea. I find that VFT reputation enhances the socio-political legitimacy of a new venture idea, which on its own decreases the effect of VFT reputation on attracting potential investors. The second study, combining signaling and agency theories, explore signals that determine new venture performance. Results find that VFT reputation is an agent’s “value signal” for venture investors (principals respect to a VFT) that is mediated by the investment of an intermediary in the new venture, which represents an efficient “commitment signal” to maximize the new venture performance. The intermediary considered assumes a special “dual role” in the VFT-investors’ relationship: it is an agent with respect to investors and, at the same time, it is a principal to the VFT. Finally, the third study is a literature review proposing a new operational model for established and new ventures that aim to acquire competitive advantage through three relevant signals: reputation, legitimacy and status. The model explains how managers and venture founders, through the acquisition of venture’s legitimacy and network status, could strategically affect the corporate reputation of their venture, leading it to higher societal status and greater competitive advantage.