ABSTRACT
INTRODUCTION
THEORETICAL DEVELOPMENT
METHODOLOGY
CONTACT
REFERENCES
TABLE 1

We examine the role of top management team characteristics on the strategic value of entrepreneurial ventures. We argue that web-based firms who are operating in a “virtual world” have diminished ability to signal (Akerlof, 1970) through traditional measures. These web-based firms (i.e. those companies which operate almost exclusively on the World Wide Web) may have fewer tangible resources, and thus much lower book values. Web-based firms are typically knowledge intensive organizations with relatively little physical assets, such as plant and equipment. They often do not even have a tested product offering. Therefore we propose that the legitimacy of the top management team will be more important in assessing the strategic value of firms entering “virtual” industries as opposed to entering more traditional, established industries. Thus, we argue that 1) top management teams positively impact the strategic value of new ventures, and 2) the relationship between top management teams and strategic value will be greater for firms operating in the “virtual” space rather than for firms operating in traditional environments.

The role of top management teams in driving the growth and performance of organizations has been extensively addressed in the strategic management literature. Much of the research on top management teams has been through the lens of upper echelons theory, which was first introduced by Hambrick and Mason in 1984. This literature suggests that the top management team is critical to the strategic direction, growth and performance of firms. This perspective is paralleled in the world of venture capital, wherein the top management team is frequently noted as the most important factor in the evaluation of new ventures. Indeed, in multiple studies of venture capital decision-making across countries, one finding has been consistent: venture capitalists place the highest priority in their venture screening process on the quality of the top management team (Keeley & Roure, 1990, Muzyka, et al., 1993). Thus, it is curious that very little research has been published on the performance implications of top management teams in new ventures.

On the other hand, we have witnessed an increased attention by both scholars (Welbourne et al. 1996; Deeds et al. 1997; Kim & Ritter, 1999) and practitioners to initial public offerings (IPOs) in recent years. Much of the attention has been brought to IPOs by the substantial amount of money being raised by firms in IPOs. In just the third quarter of 2000, 132 firms launched IPOs, raising a total of $18.3 billion, an average of $138.7 million per IPO (www.ipocentral.com). Just through the first 10 months of 2000, there were 14 U.S. IPOs that brought in at least $1 billion from their IPO. By contrast, of the 136 firms in their study of IPOs in 1988, Welbourne et al. (1996) found that the average proceeds were only $12 million. The IPO allows firms to gain access to equity capital, which enhances the survival chances of the firm (Deeds et al., 1997). The capital raised in an IPO (i.e. proceeds) can be used for any number of things including: increased marketing and branding campaigns, new product development, increased production capacity, and acquiring other firms.

The market value of a firm has historically been viewed as an estimate of the future cash flows of the firm (Brealey & Meyers, 2000). Traditional finance theory has assumed that historical accounting numbers, such as historical cash flows, P/E ratios, book value, earnings and revenue can accurately predict the value of a firm at IPO (Kim & Ritter, 1999). However, a recent study from the finance literature found that traditional accounting measures account for only 5% of the variance in IPO values (Kim & Ritter, 1999). Kim and Ritter (1999) and others before them (e.g. Weaver, 1969) conclude that IPO value is largely unrelated to historical accounting information. Instead, they suggest that underwriters, lawyers and investors involved in the pricing of an IPO utilize different information in order to assess a firm’s future earnings potential. The question then becomes, “If historical accounting information has a minimal impact on a firm’s value at IPO, then what factors do influence the firm’s value?”

We believe that one of the primary influences on investors’ perceptions of the economic potential of the new venture is the quality of a firm’s top management team. In this study, we examine the impact of top management team characteristics on the strategic value of entrepreneurial ventures. We also propose that this is especially true in ventures’ whose historical financial condition is not very indicative of its longer-term strategic value. More specifically, we argue that web-based firms who are operating in a “virtual world” have diminished ability to signal (Akerlof, 1970) through traditional financial measures. These web-based firms (i.e. those companies which operate almost exclusively on the World Wide Web) may have fewer tangible resources, and thus much lower book values. Web-based firms are typically knowledge intensive organizations with relatively little physical assets, such as plant and equipment. They often do not even have a tested product offering. Thus we argue that the legitimacy of the top management team will be more important in assessing the strategic value of firms entering “virtual” industries as opposed to entering more traditional, established industries. Thus, we argue that 1) top management teams positively impact the strategic value of new ventures, and 2) the relationship between top management teams and strategic value will be greater for firms operating in the “virtual” space rather than for firms operating in traditional environments.

This question is of critical importance to the top management team of ventures planning to issue an IPO, as well as the other stakeholders, such as the underwriters, investors, and potential alliance partners. Top managers could use the information to make appropriate strategic decisions, including resource allocation and partner selection. Underwriters and investors could use the information to improve their pricing and valuation estimates. Finally, potential alliance partners may benefit by improving their ability to estimate the value of equity arrangements.

Market Signaling

A significant amount of research has been published, primarily in finance journals, related to market signaling mechanisms used by firms prior to or during an IPO. These signaling mechanisms are used by firms to indicate to potential investors the future value of the firm (Akerlof, 1970; Spence, 1973). Market signals, it is argued, influence investors’ perceptions of the future value of the firm, and, thus, enhance the firm’s value at Initial Public Offering.

Prior research has found support for the existence of the relationship between various types of signaling mechanisms and IPO value. Higher percentages of equity retained by the entrepreneur or the top management team have been shown to enhance the value of the firm at IPO (Leland and Pyle, 1977). Higher levels of planned capital expenditure on a new venture have been shown to increase investors’ valuation of the new venture (Trueman, 1986). Additionally, level of debt (within reasonable limits) has been shown to increase the value of a firm because increased leverage influences investors’ perception of the firm’s value (Ross, 1977). Deeds et al. (1997) found a significant relationship between market signaling and IPO valuation for firms in the biotechnology industry. In particular, Deeds et al. (1997) found that three signals were significant indicators of a firm’s future potential: locating in regions with a high concentration of biotechnology firms, the number of products the firm has in development, and the number of times scientists in the firms were cited in research was an indication of the biotech firm’s quality.

Social Capital and Venture Success

In recent years, we have seen a dramatic increase in the attention, by both scholars and practitioners, paid to the role that the human element has in influencing the survival and success of organizations. A recent introduction to the management literature has been in the area of social capital. Coleman’s (1990) seminal work Foundations of Theory, is credited with introducing social capital theory into the management literature. In a recent collection of works on corporate social capital (1999) Leenders and Gabbay define social capital as “the set of resources, tangible or virtual, that accrue to an actor through the actor’s social relationships, facilitating the attainment of goals” (p.2).

A fundamental aspect of a new firm’s social capital rests in its top management team. The role that the top management team (TMT) plays in the success of young ventures has only begun to be explored. Eisenhardt and Schoonhoven (1990) found that top management team characteristics such as prior joint work experience, the size of the top management team, and diversity of industry experience are related to faster growth for new technology-based ventures. Weinzimmer (1997) examined TMT characteristics primarily derived from Hambrick and Mason’s (1984) seminal work in upper echelons theory. Specifically, Weinzimmer studied the relationship between small firm growth TMT functional and industry heterogeneity, size, and age. Weinzimmer (1997) found that functional heterogeneity and TMT size were significantly correlated with small firm growth. Other studies, of both small and large firms, have found a relationship between TMT characteristics and innovation (Bantel & Jackson, 1989; Cooke & Wills, 1999). Therefore, it is clear that TMT characteristics play a significant role in the success and survival of young ventures.

Social Capital as a Market Signal

There are several individuals that play a role in shaping the top management team of a new venture. Of course, the founder or founders often have the largest influence in the selection of top managers. Additionally investors, particularly venture capitalists, play an important role in the identification and selection of top managers for venture-backed firms (Gorman & Sahlman, 1989; Tybejee & Bruno, 1984).

Furthermore, it is likely that institutional and other IPO investors utilize the top management team as an indicator of the economic potential of the firm. In a study of investors perceptions of firm value resulting from mergers between firms, Chatterjee et al. (1992) found a significant link between the quality of the top management teams and investors’ perceptions of firm value. We are suggesting that this same relationship may exist between the quality of a top management team in an IPO firm and investors’ perceptions of firm value. As a result, founders, venture capitalists, and other pre-IPO investors are likely to choose top management teams that impress IPO investors. Thus, the choice of top management team members represents a signal to IPO investors regarding the future value of the firm. This signal may be particularly valid from the IPO investors’ perspective since they realize that the best managers are likely to choose a venture with greater economic potential. In short, by merging theory on market signaling with that on social capital we conclude that the characteristics of the top management team will be an important signal in the IPO valuation process, and firms with better top management teams with receive higher valuations at IPO.

Hypothesis I: The quality of a venture’s top management team will be positively correlated with the monetary proceeds generated at IPO.

The above hypothesis utilizes the word quality to imply positive characteristics of the top management team. Below we expound upon our meaning of quality through a discussion of the components of the top management team that we have chosen to evaluate.

The experiences that the top managers bring with them can also have a large impact on the team and firm performance. Individuals with extensive industry experience can aid the team in maneuvering through challenges. Additionally, previous experience as a top manager can serve as a signal to investors that the firm has the potential to succeed. Another component of experience is joint work experience. Top managers who have worked together in the past are more likely to have faster, more effective decision processes than teams with no previous joint work experience (Eisenhardt & Schoonhoven, 1990; Stinchombe, 1965). Therefore, we believe that the experience of the top management team members, as measured by cumulative industry experience, previous top management team experience, and prior joint work experience will be positively related to IPO value.

Hypothesis Ia: The experience of a venture’s top management team will be positively correlated with the monetary proceeds generated at IPO.

Heterogeneity of the top management team is one potential indicator of the strength and potential of the top management team. Previous researchers have found that conflict among members of a top management team was essential for effective team performance, by discouraging complacency and group think, problems that can occur in homogenous teams (Bourgeois & Eisenhardt, 1988). Functional heterogeneity (i.e. the extent to which the top managers have developed different functional expertise in previous work experience) may contribute to the success of the organization (Hambrick & Mason, 1984; Weinzimmer, 1997). Additionally, heterogeneity as measured by the presence of both genders on the top management team may also contribute to the performance of the team (Welbourne, working paper). Thus, we believe that the heterogeneity of the top management team, as measured by both functional and gender diversity will lead to enhanced firm value.

Hypothesis Ib: The heterogeneity of a venture’s top management team will be positively correlated with the monetary proceeds generated at IPO.

The extent of educational level attainment of each top manager may also contribute to the effectiveness of a top management team, and may also serve to signal to investors the quality of the team, and the likelihood of success. Higher levels of educational attainment can enhance the team’s collective social capital through increasing their collective experiences, abilities, and networks. Bantel & Jackson (1989) found that higher educational attainment levels of the top management team were positively correlated with firm innovation. Thus we expect a positive relationship to exist between educational attainment of the top managers and IPO value.

Hypothesis 1c: The education level of a venture’s top management team will be positively correlated with the monetary proceeds generated at IPO.

Our sample consists of both web-based firms and non web-based firms that issued IPOs in 1998 and 1999. While we expect that the previous hypotheses regarding the top management team will apply to our total sample, we believe that the strength of the relationships will vary for the two sub-samples. During the time frame of this study, the U.S. was in what we term stage one of the Internet revolution. During this stage, it seemed that most any IPO with a “dot com” company was fairly immune to traditional financial evaluation methods. A previous study by Cohen and Meyer (2000) found that 94% of the web-based firms were not profitable at the time of IPO. Additionally, they found that even though the web-based firms had significantly fewer employees, less revenue, and worse productivity levels than their “traditional” IPO counterparts, there was no difference in the amount of proceeds obtained in IPOs of the two sub-samples. Given the relative uncertainty of the markets the web-based firms were entering, and the apparent lack of investor’s concern over their financial performance leading to the IPO, we argue that the relationship between the management team variables and IPO proceeds will be greater than the same relationship for traditional IPOs. Also, the weak performance by the majority of web-based firms on traditional financial signals, creates a need for enhanced attention to other signals, such as the social capital of the top management team. Thus we conclude that investors will place even greater emphasis on the quality of the top management team in evaluating web-based firms’ future potential.

Hypothesis II: The positive relationship between the quality of the venture’s top management team and proceeds generated at IPO will be greater for web-based firms than for non-web-based firms.

Hypothesis IIa: The positive relationship between the experience of the venture’s top management team and proceeds generated at IPO will be greater for web-based firms than for non-web-based firms.

Hypothesis IIb: The positive relationship between the heterogeneity of the venture’s top management team and proceeds generated at IPO will be greater for web-based firms than for non-web-based firms.

Hypothesis IIc: The positive relationship between the education of the venture’s top management team and proceeds generated at IPO will be greater for web-based firms than for non-web-based firms.

Sample

The sample frame for the study includes all 884 U.S. initial public offerings (IPOs from January 1998 through December 1999). From this population, we drew a sample of all web-based IPOs and an equal number of non web-based IPOs. This initial sample of 248 firms was reduced due to the elimination of firms that 1) had been founded more than 15 years prior to the IPO, or 2) had missing data for one of the variables in the study. Older firms were eliminated to focus this study on the typical IPO firm that, over a “normal” period of time, progressed from startup, through an initial growing period, and then to a public offering. The final sample included 218 firms; 112 were non-web-based and 106 were web-based. Web-based firms were classified according to the following methodology. We examined the business description for each firm that went public between January 1, 1998 and December 31st, 1999. These business descriptions are located in the prospectus for each IPO firm. Based on a thorough review of each business description, those firms whose business description placed the most emphasis on the attainment of revenue through Internet specific channels were dummy-coded as web-based. The rest of the firms were then coded as non web-based.

Our model regresses strategic value on top management team characteristics and a number of control variables. The demographic and environmental control variables were entered in the first step of a hierarchical regression, followed by the financial control variables in the next step, and finally the block of top management team variables. By dividing the sample into two sub-samples (web- versus non-web based), we were able to examine differences across the two groups and test Hypothesis II and its correlates.

Data Sources

There were two primary sources of data for this research. The first source was the IPO prospectus of each firm. CD roms containing all IPO prospectuses for 1998 and 1999 were purchased from IPOdata.com (www.ipodata.com). The prospectus is a written document, required by the Securities and Exchange Committee (SEC), which provides a complete and accurate depiction of the firm’s management team, resources, strategies and operations. Through the prospectus and the industry and business press the entrepreneur/managers of the firm attempt to convince the financial markets of the legitimacy of their firm (Deeds et al. WP). The prospectus associated with an IPO represents one of the first and most comprehensive public documents detailing information regarding the management team, the market, and various aspects of the organization’s previous performance. Although there is a potential for bias in the prospectus, the firm is liable for any information that may mislead investors (O’Flaherty, 1984). Given the SEC requirements for accuracy and thoroughness of the IPO prospectus, the prospectus can be a useful data source for entrepreneurship researchers (Marino, Castaldi, & Dolinger, 1989). The second primary source of data for this research was the Securities Data Company (SDC) new issues database. This is a comprehensive database of information regarding firms that have executed IPOs.

Operationalization of Variables

Following the methodology of Deeds, et. al. (1997), our dependent variable, IPO value was operationalized, as total proceeds. This method identified the total capital raised in the IPO, and was gathered from the SDC database.

The control variables utilized in the study included the level of the NASDAQ market index at IPO, the age and size of the firm, and two financial variables (revenue and common equity). There has been much discussion, particularly in the finance literature regarding “hot markets” (Deeds et al., 1997) for IPOs. Hot markets are characterized by times when there are many IPOs in a given market area, and where these IPOs enjoy unrivalled success in raising significant proceeds above and beyond initial expectations. We use the Nasdaq average throughout the two-year period (1998–1999) as a proxy for hot markets in order to control for the up and down-swings of the IPO markets. A number of authors suggest that newer firms are less likely to survive than older firms (i.e. Stinchombe, 1965), so we included firm age as a control. The age of the firm was assessed by measuring the length of time between the firm’s founding date, and its IPO pricing date. The size of the organization was also seen as an important control variable, and we measured size by the number of employees at IPO. Previous literature has found support for the argument that larger firms may be more likely to survive than smaller firms due to the liabilities of smallness (Aldrich & Auster, 1986). This data was gathered from the new issues database of the Securities Data Corporation.

The financial control variables included in the study were revenues and common equity. In a study of web-based and traditional IPOs between January 1998 and August 1999, Cohen & Meyer (2000) found that only 6% of the web-based firms and 54% of the traditional firms had reached profitability by the time of IPO. Given the relatively few firms that have attained profitability at the time of IPO, we decided to use revenue and equity as our financial indicator. Revenue numbers were drawn from the SDC new issues database and represent the amount of revenue earned by the firm in the 12 months prior to the IPO. Common equity for this study is defined as the total common shareholders’ equity prior to the IPO. This data was also obtained through the SDC new issues database.

The top management team variables were created as a factor scores of a number of commonly utilized top management characteristics. The six variables included in the factor analysis were industry experience, prior top manager experience, joint experience, average education, number of female managers, and number of functions represented on the top management team. These are described below.

The cumulative number of years of industry experience prior to founding the current firm was calculated by adding the years of experience (in the same or related industry) of all of the members of the top management team. This data was obtained from the IPO prospectus for each firm. In order to capture this variable, we first examined the business description of each firm (from the prospectus) and then looked at the description of the top managers (also in the prospectus) that includes a discussion of each manager’s previous work experience. From this, we counted the number of years of experience each top manager had in the same industry and then added the totals for each top manager. Given the challenges of growing a private company into a public entity it would seem beneficial for at least some of the members of the top management team to have TMT experience in previous private or public companies. Therefore, we captured information regarding the previous experience of the top managers, to determine how many (if any) members of the IPO firms in the study had previous TMT experience. We than added the number of top managers on each TMT that had previous TMT experience.

Eisenhardt and Schoonhoven (1990) suggested that top management teams whose members worked together in previous companies may positively influence the company’s performance (sales growth), primarily through accelerated decision making. This was identified by examining the previous work experience of each of the top managers in the prospectus, and was calculated as the total number of top managers on a team who have worked together, either in pairs, or as a total group. The heterogeneity of functional backgrounds of top management teams of new ventures has also been found to enhance future growth and performance of new ventures (Weinzimmer, 1997). Functional heterogeneity was measured in accordance with Weinzimmer (1997). Weinzimmer (1997) utilized a nine-category index derived from Michel & Hambrick (1992) to measure the number of functional disciplines represented by the TMT members. The nine categories (Michel & Hambrick, 1992) include: production operations, research & development, finance, accounting, general management, marketing, law, administration, and human resources.  Additionally, a recent study by Welbourne (working paper) found that the presence of female managers on a top management team enhances the value of IPO firms. Welbourne suggests that this may be a result of top female executives hitting the “glass ceiling” in larger corporations and subsequently joining and enhancing top management teams of smaller firms. Therefore, we collected data on the number of females on the top management team. This data was collected from the management section of the prospectus of each firm.

The education of the TMT members may also influence TMT legitimacy. We used a five level categorization of educational attainment from high school to doctorate in accordance with Bantel and Jackson (1989). This scale ranged from 1 for high school diploma to a 5 for a doctorate. We then developed the average education for the TMT by adding the scores of each top manager and dividing that sum by the number of top managers. This information was primarily obtained through the prospectus. However, there were many prospectuses that did not detail the education levels of the top managers. In this case we contacted investor relations departments for these firms via email. If that was unsuccessful, we followed up with phone calls to investor relations.

The above six variables were factor analyzed using principal components analysis. The factor analysis resulted in three factors with eigen values greater than one, with the next greatest eigen value being 0.67. As a result we extracted three factors which we termed TMT experience, TMT heterogeneity, and TMT education. The six variables loaded clearly on the three factors with industry experience, prior top manager experience, and joint experience loading on one factor. Number of functions and number of females represented in the top management team loaded on the factor we called heterogeneity. Education loaded singly on the third factor. The factor scores that resulted from this analysis were utilized as variables in the regression.

Results

Table 1 shows the results of the regression analysis. The first major column shows the results of the model estimation for all of the firms in the sample. These results are divided into three columns that correspond to the three models in the hierarchical regression. The first column shows Model 1, which included only the control variables. Model 2 introduces the financial control variables. It is interesting to note that the financial control variables contributed significantly to the variance explained by the model above and beyond that explained by the demographic and environmental control variables (R2 change = 6.4%). Model 3 shows the results of the full model. The full model explained 23.7% of the variance in proceeds. The top management team variables explained an additional 6.8% of the variance beyond that of all the other control variables, providing support for Hypothesis I. Both TMT experience and education exhibited significant positive relationships with IPO value, providing support for Hypotheses Ia and Ic. Both standardized regression coefficients were of substantial magnitude suggesting a fairly strong relationship (Beta = 0.162 for experience, and B = 0.207 for education). However, Hypothesis Ib (TMT heterogeneity) was not supported.

Major columns two and three show the results of the model estimation for the two sub-samples: non-web-based and web-based firms. As expected, comparisons across the models reveal substantial difference between the two groups. First, while the incremental variance explained by financial variables was significant for the non-web-based sub-sample (R2 change = 4.8%), it was not for the web-based firms (R2 change = .8%). On the other hand, while the incremental variance explained by management team characteristics was not significant for the non-web-based firms, it was significant for the web-based firms. This supports hypothesis II that suggested that the quality of the top management team would be more positively related to IPO proceeds for web-based firms than non-web-based firms. Examination of the individual TMT variable regression coefficients for the two sub-samples provided the necessary information for the testing for Hypotheses IIa, IIB and IIC. The only individual TMT variable that shows differences across the models is TMT experience. While TMT explained a significant amount of variance in the web-based model, it did not explain a significant amount of variance in the non-web-based model. This provides support for Hypothesis IIa. The effects of the other two TMT variables did not vary across the two sub-samples, failing to provide support for Hypotheses IIb and IIc.

Discussion and Conclusion

Top management teams of new ventures are considered one of the least studied phenomena in entrepreneurship research (Weinzimmer, 1997). Most of the research on top management teams has been conducted in large firm settings, and has primarily utilized upper echelon theory (Hambrick & Mason, 1984). This study has expanded our collective understanding of the relationship between the quality of top management teams of IPO firms and their relative success in raising the funds to continue their growth and expansion.

Our belief that the proceeds obtained by the firm at IPO is related to the quality of top management teams was supported. It appears that the quality of the top management team is an important signal to IPO investors, and this signal influences the returns to the firm at IPO. This is particularly important to the pre-IPO firm since it implies that there are dual returns to the choice of top management teams. First, choosing a higher quality top management team can have a direct impact on the competitive success of the firm. But it also seems that this competitive success may be further bolstered by the impact the quality of the top management team has on proceeds, as the ability to raise funds is often critical to the firm. We specifically examined the role that previous experience, heterogeneity, and education of top managers play in influence investors’ response to a firm at IPO. We found that firms with top management teams who had greater prior experience and education were able to raise greater funds for their continued strategic efforts. It appears that top management teams with greater industry, top management, and joint experience are more favorably viewed by capital markets. These findings are of critical importance to the top management team of ventures planning to issue an IPO, as well as the other stakeholders, such as the underwriters, investors, and potential alliance partners.

Our findings also shed light on the previously un-explained variance in IPO proceeds. Prior studies showed that relatively little of the variance in IPO outcomes could be explained by financial variables (Kim & Ritter, 1999). It appears that, when top management team characteristics are added to the model, the result is substantially greater explanation and prediction of IPO outcomes, relative to financial models alone. This provides support for a more strategic view of a firm wherein its true value rests, not in it financial history, but in the perceived value of its future.

But perhaps the most intriguing and important finding of this study relates to the differences in the TMT/proceeds relationship across the two study sub-samples. As predicted, the TMT variables were significantly related to proceeds amount for web-based firms, but were not for non web-based firms. In addition, while the financial variables explained a significant percentage of variance in proceeds for the non-web-based firms, they did not explain a significant amount of variance for the web-based firms. This provides support for our belief that, in the absence of strong financial signals, investors may defer to other signals, such as those sent by the selection and composition of the top management team.

This paper sheds light on several potential future research opportunities. First, we would like to understand more about why heterogeneity was not a benefit in proceeds amount. Although there may be benefits in reducing complacency and “group think,” perhaps the challenge to decision-making is too great. Also, we would be interested in identifying other industries or sectors that may experience an increased importance on the quality of the top management teams. This, for example, may be the case in industries in the early growth stage of development because they are entering un-chartered waters, and, therefore, investors in industries with uncertain futures, pin their hopes and dollars on the team as opposed to the idea or the industry. Although this was not the focus of our study, it would also be interesting to study the timing of the IPO. The performance of the NASDAQ (a control variable in our study) seems to have a strong relationship to the amount of proceeds obtained in an IPO. Given that firms are relinquishing the same amount of equity in their company, the variation in proceeds is a serious issue for IPO firms. It may be that the timing of the IPO is more important than any other individual factor, including financial and top management team variables. Finally, the question begs, would we have found the same relationships if we had studied web-based firms in 2000 and 2001? Clearly the market has taken a significant downturn, and the web-based firms have been among the worst hit by the decline. Would we still find that financial variables hold little predictive value, while TMT variables still hold significant predictive value?

CONTACT: Boyd Cohen, University of Colorado, College of Business and Administration, Campus box 419, Boulder, CO 80309-0419; (T) 303-492-4169; Boyd.Cohen@Colorado.edu

Akerlof, G. (1970) “The Market for ‘Lemons.’ Qualitative Uncertainty and the Market Mechanism.” Quarterly Journal of Economics, 89: 488–500.

Aldrich, H. E. & E. Auster (1986) “Even Dwarfs Start Small: Liabilities of Age and Size and their Strategic Implications.” Research in Organizational Behavior, 8: 165–198.

Bantel, K.A. & S.E. Jackson (1989) “Top Management and Innovations in Banking: Does the Composition of the Top Team Make a Difference?” Strategic Management Journal, 10: 107–124.

Bourgeois, L.J. & K.M. Eisenhardt. (1988) “Strategic Decision Processes in High Velocity Environments: Four Cases in the Microcomputer Industry.” Management Science, 34: 816–835.

Brealey, R. & S. Myers. (2000) Principles of Corporate Finance. 6th edition. New York: Irwin-McGraw Hill.

Chatterjee, S., M.H. Lubatkin, D.M. Schweiger, & Y. Weber. (1992) “Cultural Differences and Shareholder Value in Related Mergers: Linking Equity and Human Capital.” Strategic Management Journal, 13(5): 319–334.

Cohen, B. & G.D. Meyer. (2000) “The Unique Characteristics of Web-Based Businesses: An Exploratory Study.” Paper presented at Babson College/Kauffman Foundation Entrepreneurship Research Conference, Babson College, June.

Coleman, J. S. (1990) Foundations of Social Theory. Cambridge: The Belknap Press of Harvard University Press.

Cooke, P. & D. Wills. (1999) “Small Firms, Social Capital and the Enhancement of Business Performance Through Innovation Programmes.” Small Business Economics, 13(3): 219–234.

Deeds, D.L., D. Decarolis, & J.E. Coombs. (1997) “The Impact of Firm-Specific Capabilities on the Amount of Capital Raised in an Initial Public Offering: Evidence from the Biotechnology Industry.” Journal of Business Venturing, 12(1): 31–46.

Deeds, D.L., P.Y. Mang, & M. Frandsen. (Working Paper) “The Impact of Industry and Organizational Legitimacy on the Flow of Capital into High Technology Ventures.”

Eisenhardt, K.M. & C.B. Schoonhoven. (1990) “Organizational Growth: Linking Founding Team, Strategy, Environment, and Growth Among U.S. Semiconductor Ventures, 1978–1988.” Administrative Science Quarterly, 35: 504–529.

Gorman, M. & W.A. Sahlman. (1989) “What do venture capitalists do?” Journal of Business Venturing, 4: 231–248.

Hambrick, D.C. & P.A. Mason. (1984) “Upper Echelons: The Organization as a Reflection of its Top Managers.” Academy of Management Review, 9: 193–206.

Keeley, R.H. & J.B. Roure. (1990) “Management, Strategy, and Industry Structure as Influences on the Success of New Firms: A Structural Model.” Management Science, 36: 1256–1267.

Kim, M. & J. Ritter. (1999) “Valuing IPOs.” Journal of Financial Economics, 53: 409–437.

Marino, K.E., R.M. Castaldi, & M.J. Dolinger. (1989) “Content Analysis in Entrepreneurship Research: The Case of Initial Public Offerings.” Entrepreneurship: Theory and Practice, 14(1): 51–66.

Michel, J.G., & D.C. Hambrick. (1992) “Diversification Posture and Top Management Team Characteristics.” Academy of Management Journal, 35(1): 9–37.

Muzyka, D., S. Birley, R.G. Leleux, & F. Bendixen. (1993) “Financial Structure and Decisions of Venture Capital Firms: A Pan-European Study.” Frontiers of Entrepreneurship Research. Babson Park, MA: Babson College, 270–285.

O’Flaherty, J.S. (1984) Going Public: The Entrepreneur’s Guide. New York: Wiley.

Ross, S. (1977) “The Determination of Financial Structure: The Incentive Signaling Approach.” Bell Journal of Economics, 8: 23–40.

Roure, J.B. & M.A. Madique. (1986) “Linking Prefunding Factors and High-Technology Venture Success: An Exploratory Study.” Journal of Business Venturing, 1(3): 295–306.

Stinchombe, A.L. (1965) “Social Structure and Organizations.” In Handbook of Organizations, ed. J.G. March, 142–193. Chicago: Rand-McNally.

Trueman, B. (1986) “The Relationship Between the Level of Capital Expenditures and Firm Value.” Journal of Financial and Quantitative Analysis, 21: 115–129.

Tyebjee, T.T. & A.V. Bruno. (1984) “A Model of Venture Capitalist Investment Activity.” Management Science, 30: 1051–1066.

Weaver, J.R. (1969) Initial Public Financing for the Small and Medium Sized Business. Washington, D.C.: education Department, Investment Bankers of America.

Weinzimmer, L. (1997) “Top Management Team Correlates of Organizational Growth in a Small Business Context.” Journal of Small Business Management, 35(3): 1–9.

Welbourne, T.M. & A.O. Andrews, A.O. (1996) “Predicting the Performance of Initial Public Offerings: Should Human Resource Management be in the equation?” Academy of Management Journal, 39(4): 891–919.

Welbourne, T.M. (working paper) “Wall Street Likes its Women: An Examination of Women in the Top Management Teams of Initial Public Offerings.”