Socio-Cognitive Drivers of Strategic Decision Making in New Ventures and Privately Held Enterprises

This dissertation consists of a collection of three essays that examine how socio-cognitive constructs such as celebrity, emotional attachment, reputation, and status influence strategic decision making in small and privately held enterprises such as startups, project-based teams, and family businesses. These non-pecuniary factors not only impact the owners of these firms, but also influence the members of the founding team and the external evaluators such as investors when determining how they want to interact with the focal firm. A simple concept such as a firm or founding team’s reputation will influence the opportunities it has for receiving outside investment, the firm’s ability to retain members of the founding team, and the aggressiveness by which the firm defends its intellectual property. Furthermore, because start- ups and family-owned firms have greater overlap between managers and firm ownership, the managers of the firm therefore are more likely to make strategic decisions based off of their own socioemotional influences. This means that these non-pecuniary influences subsequently impact a firm’s financial performance. For example, Chapter 1 of this dissertation finds that investors overinvest in celebrity-backed firms despite the fact that celebrity-backed firms experience no longer-term performance benefit – leading to an inefficient allocation of capital for the investors, while Chapter 2 shows that the type of external recognition a team receives can lead to disassembly, despite the overwhelming evidence that repeat collaboration leads to higher performance. Ultimately, the findings of these studies highlight the importance of integrating socio-cognitive dimensions into strategic management theories to better predict and interpret behavior in small and privately held organizations.