Pollock, Lee, Jin, & Lashley (2015). (Un)tangled: Exploring the Asymmetric Coevolution of New Venture Capital Firms’ Reputation and Status

Timothy Pollock – Penn State University
Peggy Lee – Arizona State University
Kyuho Jin – Seoul National University
Kisha Lashley – University of Virginia

Lei Xu – Texas Tech University
Jinyu Hu – Texas Tech University

Article link: http://asq.sagepub.com/content/early/2015/04/28/0001839215585602

Question 1. Looking through the streams of research on intangible assets, particularly on “social approval assets,” the presence of your work is remarkable. In 2010, you and your colleagues (Pfarrer, Pollock, & Rindova, 2010) emphasized a couple of agenda items for further advancing this line of research. The first point is that the field needs to advance in both theoretical and empirical research. The second point is about going beyond the general effects and building a coherent body of knowledge about the differences in specific types of assets. You and your teams have investigated different types of assets through different frameworks, including the unique creation process and effects of celebrity (Rindova, Pollock & Hayward, 2006), how affiliation with reputable firms can provide differential benefits for signaling and substantive functions and the contingent factors (Lee, Pollock, & Jin, 2011), how different types of high status affiliation can have either addictive or redundant effects (Pollock, Chen, Jackson, & Hambrick, 2010) and the different effects of reputation and celebrity derived from different mechanisms (Pfarrer et al., 2010). This paper is framed in a unique perspective. What is the story behind this paper? What inspired you to look into the relationship between status and reputation via this dynamic coevolutionary lens?

Early in my career I was as guilty as anyone of conflating different social approval assets, both theoretically and empirically. However, I really began delving into this issue when we were working on the first firm celebrity paper and the reviewers asked us to differentiate celebrity from other related constructs, including status and reputation, Since then I’ve been increasingly aggravated by how folks use status and reputation interchangeably in their theorizing, and how many studies have used the exact same measures to operationalize the two different constructs. The big problem, of course, is that reputation and status tend to be highly correlated, and to have similar relationships with a variety of outcomes in a number of circumstances. I’ve tried to address this issue in my own research, but I also co-edited the Oxford Handbook of Corporate Reputation with Mike Barnett, and we included multiple chapters in that book that reviewed the reputation literature with respect to definitions of reputation, measuring reputation, and distinguishing firm reputation from other related constructs. As an Associate Editor at the Academy of Management Journal I also handled multiple papers where the issue came up, and I encouraged the authors to theoretically and empirically explore the differences between reputation and status. Many of these studies took the form of identifying contexts or situations where reputation and status could be theorized to have different relationships with the outcome of interest. These authors have really advanced research in this area with their insights.

In trying to get my 2011 SO! article with Peggy Lee and Kyuho Jin published we also kept running into the issue of whether we were measuring status or reputation as we tried to validate our new reputation index (downloadable at http://www.timothypollock.com/vc_reputation, Sorry for the plug). We ended up conducting a number of supplemental analyses that showed there were in fact differences in the effects of status and reputation on post-IPO valuations and operating performance. As a consequence of conducting all the robustness tests with respect to status, we had measures of both status and reputation for all these VCs from 1990 to 2000. We planned to extend our reputation index through 2010, and we had all the STATA code written to calculate status measures as well as our reputation measure. So other than collecting the data from 2001-2010 a lot of the hard part was done. I’ve wanted to look at how status and reputation influence each other for a long time, because I thought that they weren’t just correlated, but that one helped develop the other. The questions were: 1) which came first? and 2) did these relationships change over time? Because there were all these newly-founded VC firms during the 1990s, thanks to the emergence of the dot com industry (and bubble), we could actually focus on these firms and explore this issue from firm inception, which no other study had done, and which was necessary to really answer this question. The statistics associated with doing this were very hairy, but Kyuho is an awesome stats person and did the leg work to figure out how to test empirically what we wanted to argue theoretically. Kisha Lashley was my doctoral student, and she joined the project, as well. The study also got a big push from a serendipitous event. I was co-leading a publishing workshop for the Oxford University Centre for Corporate Reputation, and I told one of the Centre’s leaders about our idea. She suggested I submit a proposal for a research grant from the centre. The wrinkle was that the committee reviewing grant proposals was meeting in a couple days, and if we missed that deadline we’d have to wait another three months to submit, because they only reviewed grant proposals quarterly. That night I emailed Peggy about it, we ended up skyping at about 3:00am UK time (thanks to some jet lag on my part), I worked out a rough draft of a proposal, went to bed, she worked on it while I slept (gotta love the eight hour time difference) then I went through it again the next morning and submitted it. We received the grant, and that helped spur the project along. And that’s how this study came to be.

Question 2. This paper focuses on the mutual beneficial relationship between reputation and status and how the relationship changes throughout different stages of the firm development. In addition, the paper also highlights the within-asset dynamics, the relationship between prior and current status, and between prior and current reputation. Status is “sticker” in the sense that once it is established, it is not as sensitive to the impact of a negative event. But reputation needs to be constantly and consistently reinforced. The theoretical framing of this paper is at the firm-level. You have done a number of studies on the burden of star CEOs and prestigious directors. Do you see the firm-level dynamics between reputation and status applicable to the individual level, particularly for the CEO and board directors, in terms of both individual outcomes and firm outcomes (i.e., the “individual brand” and “corporate brand”)?

Brand is a different construct than reputation and status, so I would be careful using that term. With respect to the relationship between status and reputation, though, I think the general process would be about the same at the individual level as it is at the firm level. One difference, however, is that status is inherently a multi-level construct; status can be gained by associating with high status individuals, but it can also be gained by associating with high status organizations. That’s why we use the status of educational institutions and the companies where individuals have worked or served on boards as indicators of their status. Reputation is tied more closely to performance, so to the extent we can directly observe individuals’ performance, the less relevant performance at higher levels of aggregation may be. That is, an individual can have a good reputation, even if their organization does not. The problem, of course, is that individual performance can be difficult to observe, especially for folks like CEOs and directors. Thus, rightly or wrongly, current firm performance is often attributed to the current CEO and directors, even if they may have had little or no direct effect on it. So, the basic mechanisms and dynamics we describe in our paper are applicable at both the firm and individual levels, but there are some caveats that can make some attributions more difficult at the individual level.

Question 3. One of the things we notice from your line of work is the critical role of events highlighted in the models. For instance, the significant role of nonconforming events in the celebrity development process and differential interpretative frames for reputation and celebrity firms derived from earning surprise events. Of course, the focal event in this paper is the blockbuster deal or the big hit event. In all cases, the same event carries different effects depending on the specific intangible asset of interest. Could you please elaborate on your thoughts in terms of the particular role of significant events in explaining the process and the effects of intangible assets?

That’s an interesting observation! I hadn’t really thought about it, but you’re right, events do play a significant role in a lot of my theorizing. I think it is because significant events draw attention and cause people to engage in sensemaking. We do not continually engage in sensemaking, particularly with respect to status and reputation. Once an assessment is made and a collective perception is determined we move on, and that assessment becomes our convenient shorthand for making assessments and predictions. We can then shift our limited attention and cognitive effort to other things. When a significant event occurs we pay attention again, and we engage in sensemaking to figure out whether the event is consistent or at odds with what we already think and update our assessments, which can lead to changes in the social approval asset in question.

In the research I do, my colleagues and I have tried to think about the different underpinnings of each social approval asset, and how they are likely to shape the way new information is collectively interpreted, and what the consequences will be for the social approval asset in question. For example, in my 2010 AMJ with Mike Pfarrer and Violina Rindova, we talked about how reputation and celebrity serve as different interpretive frames that affect the dominant type of information processing employed when firms make sense of an earnings surprise, I’m currently working on a new paper with Violina, Mike, and Mike’s doctoral student Tim Hubbard that takes a similar theoretical approach in exploring the different relative effects of status and celebrity on analyst coverage of, and alliance formations with, dot com firms during the late 1990s. Among other things, we consider how status and celebrity affect the way that the firm’s underpricing is assessed and influences analyst coverage and alliance formations, so here again we are considering the effects of an event. In the ASQ we considered how much new information was provided by each occurrence of the event (i.e., being associated with a blockbuster IPO), and how a firm’s current status and reputation influenced the event’s effect on the VC’s subsequent status and reputation. In all these cases, the different underpinnings of each social approval asset led to different expectations and outcomes.

Question 4. From a practitioner’s perspective, what would you see as the unique challenges faced by new firms and more matured firms? What would you recommend to firms in terms of enhancing and maintaining their reputation and status?

We talk about some of the implications of our findings in the ASQ article for new firms. The challenges new firms face are that uncertainty about them is high, they have no track record, and they have limited resources. We suggested that new firms focus their efforts and limited resources on building their reputations first, rather than focusing on status climbing. You have to leverage whatever resources you have, bust your ass and do a good job, and the high-status firms are more likely to notice and perhaps give you a shot. A good reputation will help new firms build their status more, particularly in the early days, than status will enhance their reputation.

For more mature firms the challenges are maintaining your reputation and status if they are high, and trying to change them if they aren’t. One of the interesting implications of our findings for more mature firms is that because reputation and status co-evolve, one way to maintain and even enhance your status is by continuing to build your reputation. High-status actors often forget this, and this is why even though status is sticky, status can eventually deteriorate if reputation declines too much. Investments in reputation are also investments in status. I think it would be hard for a mature low-status actor to become high status, but they might be able to improve their relative standing in the social hierarchy somewhat through a good reputation.

Question 5. Could you share some of your personal journey and wisdom on how to develop a coherent research stream and use it as a platform to contribute to the conversation and grow as a scholar?

Everyone’s personal journey is different because we all have different strengths and weaknesses. But, I do think there are certain factors that are necessary to grow and contribute to scholarly conversations. The first is having a thick skin, which allows you to take and learn from criticism and feedback. The vast majority of feedback you receive in our field is negative, and you have to be able to deal with that. The low acceptance rates at our top journals also mean you are going to fail a lot, particularly early on as you learn the ropes, and you can’t let that get you down, either. In my own case I’ve been rejected many, many times, and it wasn’t really until my fourth year as an assistant professor that I started figuring the process out and getting more R&Rs. I still get rejections more frequently than I’d like to admit. Whenever I get rejected I of course am unhappy, but I try to put that aside as quickly as I can, look at the reasons for the rejection, determine what I think are the most important issues and which are likely idiosyncratic to the reviewers (you don’t want to just rewrite your paper for the prior set of reviewers), and then revise the paper accordingly and move on.

This leads to a second factor, and that’s perseverance. You can’t get all weepy and say you can’t bear to think about the paper for a year after a rejection. You have to keep plugging ahead until you get it right, or until you get the right editor and reviewers. I’ll go through every “A” journal – sometimes some of them more than once if the paper has changed enough – before I move on to the next tier of journals. I also don’t give up on my papers. The longest any study I’ve worked on has taken from inception to publication is 13 years. You just have to keep going, particularly in the face of adversity.

A third factor is that successful scholars develop a taste for big, interesting questions and explore them by conducting ambitious, high quality studies. They don’t do incremental stuff or dash off a half-assed study with clear flaws that they just try to publish anywhere quickly. I’m grateful for my training as a doctoral student on both of these counts. Joe Porac and Jim Wade both instilled high expectations in me that studies should be done to the highest standards, and that you need to do every test you can think of to rule out alternative explanations for your findings. They also pushed me to think hard about the theoretical processes at work, and whether the study was making a fundamental theoretical contribution. When I was a doctoral student Joe and I were driving from Champaign to Chicago, and I asked him what my biggest weaknesses were (this is part of getting and acting on criticism), He said I wasn’t theoretical enough, which was true. I’ve always been drawn to interesting phenomena, and I tended to be very phenomenological in my research questions and hypothesis development. I needed to learn how to find the interesting theoretical issues and contributions in the phenomenon I was studying, and I’ve worked hard on developing that skill ever since that day. At the same time I think the fact that I am drawn to phenomena first has also served me well, because the biggest theoretical ideas and contributions do not come from looking for gaps in theory; they come from solving interesting real-world puzzles or paradoxes. So, to make significant contributions you need to have a nose for interesting puzzles and paradoxes in the real world, be able to see the new theoretical insights that solving these puzzles provides, and conduct rigorous, high quality studies that thoroughly test your arguments.

Finally, a fourth factor common to really successful scholars is that they are good writers. We spend far more time in our formal PhD training developing our methodological skills than we do our writing chops. Most of what we learn about writing we learn on the job as we work on our manuscripts alongside our advisors. I was fortunate that Joe is an excellent writer, and also that we worked on many of our studies together literally at the same time; he’d be on his computer in Chicago, I’d be in his office in Champaign with him on speaker phone, and we’d use Laplink, or later Netmeeting (this was the stone age of the Internet, remember), to sync up the computers. I literally watched him write, took the mouse to add things, and then he’d take it back. It wasn’t the most efficient way to write, but it was the most collaborative way I’ve ever written, and it also helped me see how he thought as he wrote, which was invaluable training. I’ve continued to always try and improve my writing; I analyze others’ papers for how they’re written, I read books on writing, I learn through my collaborations, and reviewing and editing provide “disciplined practice” that has also helped me improve as a writer. I also revise my papers many, many times, continually looking for ways to improve them. In this way, writing brings in all the other factors I’ve talked about: you have to be able to take and act on criticism, you have to persevere, and you have to hold yourself to the highest quality standards and always ask, is this good enough? What’s really interesting here?

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