Entrepreneurial Signaling via Education: A Success Factor in Innovative Start-Ups

Abstract

Unlike traditional start-ups, innovative start-ups and their respective market partners are faced with severe problems of asymmetric information due to their lack of prior production history and reputation. Here, we study whether and how entrepreneurial signaling via education can help innovative entrepreneurs signal their abilities to banks and prospective employees. We argue that innovative entrepreneurs signal their quality by means of certain characteristics of their educational history. In particular, we expect potential employees to use an entrepreneur’s university degree as a quality signal when deciding whether to accept a job at an innovative start-up, and we expect banks to use a more precise indicator, namely the actual length of study in relation to a standard length, as a signal when deciding to extend credit to an innovative founder. By contrast, traditional start-ups are not faced with the same problems of asymmetric information, so we do not expect employees or banks to require the same signals from them. We empirically test our hypotheses using a dataset of more than 700 German start-ups collected in 1998/99. All hypotheses are borne out by the data. Copyright Springer 2007M13, M5, D82, M21,

Signaling in Equity Crowdfunding

“…Naturally, the entrepreneur is assumed to have better knowledge about the true quality of the start-up than the potential investor (see, for example, Michael, 2009;Backes-Gellner and Werner, 2007;and Busenitz, Fiet and Moesel, 2005). This is even more pronounced in an equity crowdfunding context, however, because small investors are less likely to have experience evaluating investment opportunities.…”

Entrepreneurship, Wage Employment and Control in an Occupational Choice Framework

“…The classic notion has long been that education can only be used as a signal of superior productivity by employees, not by entrepreneurs, as the only stakeholders towards whom signals can be valuable are (prospective) employers (Weiss, 1995). However, as recent works indicate and support empirically, entrepreneurs may use their education as a signal towards suppliers of capital (Parker and Van Praag, 2006), or towards customers and highly quali…ed employees (Backes-Gellner and Werner, 2007). This may provide an explanation for higher returns to education for entrepreneurs than for employees, but not why the return to cognitive abilities as such is higher.…”

Analysis of the entrepreneurship iniativeand the entrepreneurial spirit about perception the students of a tecnológico federal

“…No se puede negar el papel social que desempeña la educación terciaria y sus aportaciones, por lo que los empresarios la reconocen como un potente instrumento que ayuda a superar los problemas típicos a los que se puede enfrentar una empresa (Backes-Gellner & Werner, 2007). Por ello se recomienda que los estudiantes que posean atributos para ser empresarios pertenezcan a comunidades de conocimientos sobre emprendimiento en donde se compartan enseñanzas, se desarrollen ideas Análisis de la percepción sobre iniciativa empresarial y el espíritu emprendedor en estudiantes de un tecn ológico federal | Salvador Sánchez Rodríguez, Claudia Alejandra Hernández Herrera, Martha Jiménez García | pp.…”

“…Con certeza, para un empresario la educación es un potente instrumento para superar los problemas típicos de información asimétrica para las nuevas empresas innovadoras (Backes-Gellner & Werner, 2007). Entonces, la promoción del espíritu empresarial y la innovación en la educación superior no solo se relaciona con la forma en cómo se encuentra estructurado el plan de estudios, se involucra también con la estructura del gobierno de la universidad y el liderazgo con el que se toman las decisiones (Mok & Yue, 2015).…”