Preparedness and Cognitive Legitimacy as Antecedents of New Venture Funding in Televised Business Pitches

Abstract

This research addresses the question of what specific entrepreneurs’ behavior increases the propensity for resource acquisition. Within the context of business “pitches,” we explore subtleties in the process via a theoretically derived model linking entrepreneurs’ preparedness behavior, perceived cognitive legitimacy, and amount of funding received. We test this model using data coded from two sources: 14 episodes of the television show “Shark Tank” that aired in 2009, as well as 84 episodes of “Dragons Den” that aired from 2005 to 2010. Within these episodes, we specifically examine the 113 individual business pitches that received funding. Overall, results suggest the relationship between entrepreneurs’ preparedness behavior and the amount of funding received is mediated by cognitive legitimacy. Specifically, entrepreneurs’ increased preparedness behavior was positively related to increased cognitive legitimacy. Cognitive legitimacy, in turn, was positively related to amount of funding received. We offer thoughts regarding implications from both theoretical and practical perspectives.

Making the Pitch: Examining Dialogue and Revisions in Entrepreneurs' Pitch Decks

“…The extant literature describes how the business opportunity is "talked into existence," as Pollack et al put it [53], by telling narratives about the opportunity, narratives that include personal, generic, and situational stories [48]. The literature focuses on how these narratives are presented via presentation skills and made persuasive through the presenter's charisma [11], [77] as well as the team's composition and track record [77].…”

Cognitive Legitimacy, Resource Access, and Organizational Outcomes

“…Thus, different theoretical approaches have been proposed concerning the types of legitimacy (Meyer & Rowan, 1977;DiMaggio & PowelL, 1983;Aldrich & Fiol, 1994;Scott, 1995;Suchman, 1995). The effects of each type of legitimacy on diverse performance metrics has been measured through multiple indicators: IPO share values, stock prices (Zuckerman, 2000;Pollack, Rutherford, & Nagy, 2012), stock market risk (Bansal & Clelland, 2004), and interest group support (Choi & Shepherd, 2005).…”

“…Legitimacy research has underlined, for some time already, the need to analyze the cognitive aspects of legitimacy empirically (Zucker, 1989). Recent research has shown that cognitive legitimacy plays a key role when entrepreneurs call for funding (Pollack, Rutherford, & Nagy, 2012).…”

“…Since Zucker (1989) or Suchman's (1995) requests for more studies on the different types of legitimacy, not much has been written to explain the relationships between the different types of legitimacy and organizational survival. Empirical studies have analyzed the effects of technical and management legitimacy on hospital survival (Ruef & Scott, 1998); environmental legitimacy on stock market risk (Bansal & Clelland, 2004); or even sociopolitical (Deeds, Mang, & Frandsen, 2004), cognitive (Choi & Shepherd, 2005;Pollack, Rutherford & Nagy, 2012), and top management team legitimacy (Cohen & Dean, 2005;Higgins & Gulati, 2003 on IPO resource attraction.…”

The co-construction of entrepreneurial sensemaking

“…Pollack et al (2012) describe how entrepreneurs use the pitch presentation to enact their business opportunity and enlist the help of stakeholders. Entrepreneurs do so by guiding financiers to make sense of the venture as if it already existed, through the use of a narrative.…”