Kirtac, Ozan (2025) When status substitutes for performance: signal suppression and heuristic dominance in private equity investment decisions. Academy of Management Proceedings, 2025 (1). ISSN 0065-0668
Full text not available from this repository.Abstract
Securing funding is a critical challenge for entrepreneurs, often exacerbated by information asymmetry. Using a dataset of 411 private equity cases, we examine whether direct and indirect employment ties help overcome this asymmetry through the mediating roles of reputation, social obligation, and social signaling. Our analysis identifies social signaling, reflecting the symbolic credibility of affiliations with reputable organizations, as the dominant mechanism mediating the effects of employment ties on investment decisions. Contrary to prior research emphasizing reputation (Podolny, 1994; Stuart, Hoang, & Hybels, 1999) and social obligation (Gulati, 1995; Shane & Cable, 2002) as key mediators, we find these mechanisms do not independently mediate the effects of employment ties when social signaling is considered. By extending signaling theory (Spence, 1973) to entrepreneurial context, we underscore the importance of symbolic associations in shaping investment outcomes, offering actionable insights for entrepreneurs and investors navigating uncertain, high- stakes environments.
| Item Type: | Article |
|---|---|
| Additional Information: | © Academy of Management Proceedings |
| Divisions: | LSE |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HG Finance |
| Date Deposited: | 19 Nov 2025 09:24 |
| Last Modified: | 20 Nov 2025 15:30 |
| URI: | http://eprints.lse.ac.uk/id/eprint/130254 |
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