Entrepreneurial beacons: the Yale endowment, run-ups, and the growth of venture capital

Bermiss, Y S, Hallen, B L, Pahnke, E C and McDonald, R (2017) Entrepreneurial beacons: the Yale endowment, run-ups, and the growth of venture capital. Strategic Management Journal, 38 (3). pp. 545-565. ISSN 0143-2095

Abstract

This article investigates the social context of entrepreneurship in organizational sectors. Prior research suggests that firm foundings are driven by collective patterns of activity—such as patterns of prior foundings in a given sector. Building on research on social salience and signals, we consider the influence of singular sector-level triggers, which we call entrepreneurial beacons. We argue that the actions or outcomes of single, salient organizations attract and motivate entrepreneurs, thus increasing the rate of foundings. We test this logic by examining the impact of the Yale University endowment's investment choices and of venture-capital-backed IPO run-ups on venture-capital foundings between 1984 and 2011. We find support for the existence and influence of beacons and outline boundary conditions for their effects.