Benjamin L. Hallen
Assistant Professor of Strategy and Entrepreneurship
PhD in Strategy, Organizations, and Entrepreneurship - Stanford University (MS&E)
M.C.S. in Computer Science - University of Virginia
B.S. in Electrical Engineering - University of Virginia
The Causes and Consequences of the Initial Network Positions of New Organizations: From Whom do Entrepreneurs Receive Investments
Administrative Science Quarterly (December 2008)
This paper examines the mechanisms by which organizations establish their initial network positions, or sets of network ties. Although there has been significant research on the evolution of organizational network positions, how a new organization establishes its original network position has received more limited attention. I attempt to redress this imbalance using two competing logics, one based on the previously developed network ties and human capital of a new organization's founders and the other based on a new organization's early accomplishments. I test these logics in a study of venture capitalists and other investment organizations forming investment ties with (e.g., investing in) 92 Internet security ventures. In contrast to the literature on network position evolution, I find that new organizations take multiple paths to their initial network positions, with which path an organization takes being determined by when it forms its first ties.
Catalyzing Strategies and Efficient Tie Formation: How Entrepreneurial Firms Obtain Investment Ties
Benjamin Hallen and Kathleen Eisenhardt (Stanford University)
Academy of Management Journal (February 2012)
Although network ties are crucial for firm performance, the strategies by which executives actually form ties are relatively unexplored. In this study, we introduce a new construct, tie formation efficiency, and clarify its importance for superior network outcomes. Building on fieldwork in 9 Internet security ventures seeking investment ties, we unexpectedly identify two equifinal paths for how executives form ties efficiently. One relies on existing strong direct ties and is only available to privileged firms. The other relies on a second new concept, catalyzing strategy, by which executives advantageously shape opportunities and inducements to form ties, and is available to many firms. Overall, we add insights to the network and signaling literatures, and to the nascent literature on how strategic action, especially by low-power actors such as entrepreneurs, shapes critical network outcomes.
Unpacking Social Defenses: A Resource-Dependence Lens on Technology Ventures, Venture Capital, and Corporate Relationships
Benjamin Hallen, Riitta Katila (Stanford University), and Jeff Rosenberger (Wealthfront)
Academy of Management Journal, in press.
Inter-organizational relationships offer many potential benefits, but they also expose firms to dangers, such as misappropriation, that pull partners apart. This tension between collaboration and competition is central to tie formation, especially for young technology-focused firms who have both high need for resources and high appropriability of their own resources. Prior work has examined legal and timing defenses that enable inter-organizational ties; we focus here on social defenses. In a longitudinal study of equity tie formation between young firms and established corporations, spanning 5 technology-based industries and 25 years, we unpack the effects of social defenses and find, intriguingly, that third-party social defenses are particularly significant when more traditional defenses are unavailable. Beyond providing resources and legitimacy, ties with centrally positioned third parties are a critical mechanism whereby young low-power firms can enhance their power in tie formation. Our study also sheds light on how a portfolio of ties helps young technology firms mobilize resources and manage resource vulnerabilities.
Is Firm Reputation Seen Differently by New Market Participants? How Entrepreneurs Evaluate Venture Capitalists' QualityBenjamin Hallen
Email for copy
There has been substantial research on the value of young firms engaging high-reputation partners, with this research highlighting these partners' substantive and signaling benefits. Yet broadly assumed within this literature is that entrepreneurs find it relatively easy to figure out which potential partners have higher reputations. In this paper I challenge this assumption, and argue instead that figuring out a firm's reputation may be quite difficult for many entrepreneurs due to limitations in their own networks and understanding of a market. Using a novel dataset of 1,946 ratings of the quality of 241 early-stage venture capital firms by entrepreneurs that approached these firms for investments, I explore how entrepreneurs vary in their perceptions of firm quality and the drivers of this variance. I find that while more-embedded entrepreneurs primarily base evaluations on firm reputation as understood within the market, less-embedded entrepreneurs primarily base evaluations on "local buzz" (i.e., the readily available opinions of others) and firm celebrity. Overall, this paper suggests that many entrepreneurs have difficulty making sense of the markets they enter, and that new market participants may perceive firm quality differently than more established participants.
Agentic Networks and Entrepreneurial Action: Implications for Resource Acquisition, Product Innovation, and Market EmergenceJason Davis (INSEAD) and Benjamin Hallen
Do Accelerators Accelerate? A Study of Venture Accelerators as a Path to SuccessBenjamin Hallen, Christopher Bingham (University of North Carolina), and Susan Cohen (University of Richmond)
Email for copy
A fundamental challenge for new ventures is overcoming liabilities of newness - particularly, lack of business knowledge and lack of social embeddedness. Accelerators, intense entrepreneurial programs, hope to alleviate these liabilities by giving new ventures lots of knowledge and contacts in a very short period of time. However, because of time compression diseconomies (vs economies) the literature suggests that these claimed benefits may not be realized. Thus, attempts at acceleration may be ineffective or even counterproductive. We test these competing ideas by comparing performance effects of accelerator-backed new ventures to a matched set of non-accelerator backed new ventures. Compared to the non-accelerator backed new ventures, we find that ventures backed by the top accelerators are faster to raise venture capital and to reach high levels of customer traction. Intriguingly, our results also indicate that prior founder experience (e.g., prior entrepreneurial experience, formal education) is not a substitute for accelerators - suggesting that top accelerators provide a unique form of entrepreneurial learning and networks. Key contributions are uncovering evidence for time compression economies (vs diseconomies) in the new venture gestation process, and unpacking forms of learning and networks that may aid venture development.
The Synergies between Venture Capitalists and Angels: Unpacking the Tensions between Ventures Obtaining Financial Capital, Knowledge, and Networks
Entrepreneurial Beacons as Founding Triggers: The Yale Endowment, Run-ups, and the Growth of Venture CapitalRory McDonald (Harvard Business School), Benjamin Hallen, and Emily Cox Pahnke (University of Washington)