Betting on the Coachable Entrepreneur: Signaling and Social Exchange in Entrepreneurial Pitches

Abstract

Given that stakeholders often commit more than capital to a startup, they commonly stress how important it is for entrepreneurs to be “coachable.” To date, however, coachability has received little attention in entrepreneurship research. We address this gap by first establishing the entrepreneurial coachability construct and validating a measurement scale. Then, drawing on social exchange and signaling theories, we develop and test a novel framework in which coachability influences a potential investor’s willingness to invest. We find that entrepreneurial coachability functions as a viable signal in a pitch setting, but this impact is conditional on the investor’s prior coaching experience.

The promise of social signal processing for research on decision-making in entrepreneurial contexts

“…Funding decisions by investors are almost by definition made after some form of social interaction with the entrepreneurs or team of entrepreneurs took place. One particular setting that facilitates interaction between new venture teams and prospective investors is where entrepreneurs have the opportunity to convey their business idea in an entrepreneurial pitch (Ciuchta et al 2018;Pollack et al 2012). Most often, investment decisions are made by bankers (e.g., Mason and Stark 2004), business angels (e.g., Clark 2008), or venture capitalists (e.g., Chen et al 2009;Shepherd et al 2003;Zacharakis and Shepherd 2001).…”

“…Concerning investors' decisions, research on entrepreneurial passion has suggested that the demonstrated passion of an entrepreneur in a pitch directly influences investor decision-making (Cardon et al 2009;Chen et al 2009;Pollack et al 2012). Hence, nonverbal behavioral cues such as using animated facial expressions, a lot of gestures, and talking with varied tone and pitch could send signals of passion to investors in an entrepreneurial pitch (Nagy et al 2012;Ciuchta et al 2018). In addition, research and practice of entrepreneurship would suggest that coachability is very important for investors and, for example, an open hand gesture, mimicry, and attention through eye contact could influence investors' judgment of entrepreneurs' degree of coachability (Ciuchta et al 2018).…”

“…In the case of decisions made by others yet affecting entrepreneurs, a vast amount of studies focuses on how business angels and venture capitalists arrive at their investment decisions (e.g., Maxwell et al 2011;Petty and Gruber 2011). Many of those have investigated entrepreneurial pitches as a particular setting in which investors judge business ideas and note that their funding decisions are generally influenced by what is being said and done by the entrepreneurs (Ciuchta et al 2018;Clarke 2011;Clarke et al 2019;Pollack et al 2012). In particular, both the verbal content of the presentation and the presentation style are considered important (Chen et al 2009;Clark 2008).…”

“…Theoretical insights from both signaling theory (e.g., Busenitz et al 2005;Connelly et al 2011) and social exchange theory (e.g., Huang and Knight 2017) have proven helpful in understanding the impact of social signals being sent during human interactions (Ciuchta et al 2018). Prior research has predominantly used manual techniques to analyze social signals (Vinciarelli et al 2008).…”

Advances in the Psychology of Workplace Coaching

“…We are also interested in theoretically and empirically robust papers that expand coaching to new work contexts and populations (e.g., entrepreneurs; Ciuchta, Letwin, Stevenson, McMahon, & Huvaj, ).…”