Timothy B. Folta - Academia.edu (original) (raw)

Drafts by Timothy B. Folta

The founder (team)’s human capital is a vital determinant of future firm performance. This is a s... more The founder (team)’s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder’s choice of the initial workforce’s human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

Papers by Timothy B. Folta

The Journal of Technology Transfer

One way governments aim to spur entrepreneurship is through providing startup capital to qualifie... more One way governments aim to spur entrepreneurship is through providing startup capital to qualified ventures. In the United States, the government does so through federal grant programs like the SBIR/STTR program. Despite the government’s efforts to spur entrepreneurship through capital distribution, we don’t know much about the selection capabilities that government agencies like the National Institutes of Health (NIH) have in place to choose qualified ventures for funding. Through exploiting a quasi-natural experiment enabled by the American Reinvestment and Recovery Act (ARRA) of 2009, we seek to determine whether the NIH selects ventures with the most innovation and commercialization potential. Overall, our findings suggest that the NIH effectively identifies and prioritizes ventures with superior observable innovation capabilities. Yet, they could do more to discern the underlying tacit value of the innovation to prioritize selecting high-risk ventures that have the potential to...

Academy of Management Discoveries, 2022

Policy makers around the world are increasingly interested in spurring entrepreneurship by provid... more Policy makers around the world are increasingly interested in spurring entrepreneurship by providing capital to promising ventures, and often develop government programs designed to do so. Whether ...

The Palgrave Encyclopedia of Strategic Management, 2018

In contrast, angel investors spur innovation, but not commercialisation, write Supradeep Dutta an... more In contrast, angel investors spur innovation, but not commercialisation, write Supradeep Dutta and Timothy B. Folta

Strategic Entrepreneurship Journal, 2007

SSRN Electronic Journal, 2016

Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success * The founder... more Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success * The founder (team)'s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder's choice of the initial workforce's human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

Strategic Management Review, 2021

This essay emphasizes that the key determinants of redeployment decisions-adjustment costs and tr... more This essay emphasizes that the key determinants of redeployment decisions-adjustment costs and transaction costs-are illuminated by consideration of the sources of resource specificity. Building on prior work separating the degree of a resource's firm specificity and usage specificity, we develop a set of novel propositions on the conditions under which headquarters are more likely to withdraw a resource from a declining market and transfer it to a more attractive one. First, we clarify how usage specificity and business relatedness may interact in determining adjustment costs. Second, we examine how firm specificity and market transaction costs may interact in determining the use of resource redeployment. Third, we integrate the dimensions of usage-and firm-specificity into our framework explaining redeployment decisions. Overall, this essay contributes to an improved understanding of the self-selection processes of redeployment decisions and provides managers with a framework to evaluate particular resources as potential candidates for internal redeployment in the course of corporate renewal.

Organizational Research Methods, 2018

* This version of the article has been accepted for publication and undergone full peer review bu... more * This version of the article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the publisher's final version AKA Version of Record.

Strategic Management Journal, 2018

Combining studies on real options theory and economic short-termism, we propose that, depending o... more Combining studies on real options theory and economic short-termism, we propose that, depending on CEOs' career horizons, CEOs have heterogeneous interests in strategic flexibility and, thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long-term incentives and institutional ownership will mitigate the relationship between CEOs' career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self-seeking behavior will impact real options investments. Managerial Summary This paper helps to explain how a CEO's self seeking-behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms' real options, which should lower the investments in the firms' real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long-term incentives and institutional investors.

SSRN Electronic Journal, 2017

This paper develops and tests a model where the performance of an entrepreneur as employee explai... more This paper develops and tests a model where the performance of an entrepreneur as employee explains why she/he decides to venture outside the industry of the parent firm and what are the implications of this type of entry choice on the initial size of the founded firm. Our findings:(1) assist in building a more nuanced theoretical understanding of how individuals determine type of entry, and initial size; (2) have implications for how we interpret the relationship between employee performance and entrepreneurial entry process; and (3) suggest initial size as an important mechanism behind the performance advantage of spinouts.

The Palgrave Encyclopedia of Strategic Management, 2016

Strategic Entrepreneurship Journal, 2014

This paper discusses the scholarly work of Arnold C. Cooper. He was an influential pioneer in the... more This paper discusses the scholarly work of Arnold C. Cooper. He was an influential pioneer in the study of entrepreneurship, strategic management, and technology management, and his work provided an important foundation for subsequent development in those fields. Many of his contributions are a result of methodological approaches to gathering data, enabling him to draw insights from systematic empiricism of phenomena. Many of his most influential works are discussed and linked to subsequent work, including work emanating from this journal. Future research opportunities tied to his work are also elaborated.

Journal of Business Venturing, 2016

We examine the influence of private equity, in particular angel groups and venture capital (VC) i... more We examine the influence of private equity, in particular angel groups and venture capital (VC) investments, in shaping the innovation of technology ventures and in realizing successful exits. We consider the theoretical and empirical implications of angel group investment and isolate the separate influences of angels and VCs towards a venture's innovation strategy and successful exit, revealing striking insights about their relative contribution. We do so by tracking 350 technology ventures that receive angel group and VC investment. The methodologies employed econometrically control for identification issues in the dynamic multistage nature of external capital financing.

Academy of Management Proceedings, 2013

It is well recognized that organizations attain “status” or prestige by affiliating with notable ... more It is well recognized that organizations attain “status” or prestige by affiliating with notable partners or institutions, and that there are clear benefits to high status positions. We are interested in an obvious extension to this observation – what are the organizational limits to status? Why is not status overexploited by affiliates? These questions invite consideration that decisions to exploit status in new products might hinge not purely on the benefits of status, but also its impact on operating costs and opportunity costs. Opportunity costs may arise because overexploitation of status may result in formal or informal sanctions by institutions governing affiliations. Using a structural model, we deduce how status separately affects price, operating cost, and opportunity cost. We also uncover that prior research may understate the benefits to status because it ignores that exploitation decisions are endogenous to status. Our empirical context is new product introductions in the Italian Wine industr...

Research Methodology in Strategy and Management

I am interested in clarifying the discussion of how researchers might try to isolate real option ... more I am interested in clarifying the discussion of how researchers might try to isolate real option effects to identify whether managerial decisions are guided by a real option heuristic. If we are to claim that the theory of real options illuminates managerial behavior, then as a field, we must converge on an understanding as to what constitutes a real option effect, and what does not. The discussion centers on hypothesis development, measurement issues, and research methodology.

Strategic Management Journal, 1998

... of activities than 'exploitation' for firms in dynamic envi... more ... of activities than 'exploitation' for firms in dynamic environments characterized by short life cycles and ... Also escalating technological uncertainty was the undeveloped regulatory process. ... or missing data and transactions involving academic or govern-ment agencies, the final ...

Strategic Entrepreneurship Journal, 2007

Industrial and Corporate Change, 2009

In this article, we examine whether the option value of keeping an operation alive will deter fir... more In this article, we examine whether the option value of keeping an operation alive will deter firms from exiting an industry. We find that uncertainty dissuades firms from exiting an industry, but only when the sunk costs of entering and exiting that industry are sizeable. Moreover, we argue and find that sunk costs can be influenced by the technological intensity of an industry, by the extent to which a firm competes on the basis of innovation, and by the firm's diversification strategy.

The founder (team)’s human capital is a vital determinant of future firm performance. This is a s... more The founder (team)’s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder’s choice of the initial workforce’s human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

The Journal of Technology Transfer

One way governments aim to spur entrepreneurship is through providing startup capital to qualifie... more One way governments aim to spur entrepreneurship is through providing startup capital to qualified ventures. In the United States, the government does so through federal grant programs like the SBIR/STTR program. Despite the government’s efforts to spur entrepreneurship through capital distribution, we don’t know much about the selection capabilities that government agencies like the National Institutes of Health (NIH) have in place to choose qualified ventures for funding. Through exploiting a quasi-natural experiment enabled by the American Reinvestment and Recovery Act (ARRA) of 2009, we seek to determine whether the NIH selects ventures with the most innovation and commercialization potential. Overall, our findings suggest that the NIH effectively identifies and prioritizes ventures with superior observable innovation capabilities. Yet, they could do more to discern the underlying tacit value of the innovation to prioritize selecting high-risk ventures that have the potential to...

Academy of Management Discoveries, 2022

Policy makers around the world are increasingly interested in spurring entrepreneurship by provid... more Policy makers around the world are increasingly interested in spurring entrepreneurship by providing capital to promising ventures, and often develop government programs designed to do so. Whether ...

The Palgrave Encyclopedia of Strategic Management, 2018

In contrast, angel investors spur innovation, but not commercialisation, write Supradeep Dutta an... more In contrast, angel investors spur innovation, but not commercialisation, write Supradeep Dutta and Timothy B. Folta

Strategic Entrepreneurship Journal, 2007

SSRN Electronic Journal, 2016

Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success * The founder... more Entrepreneurial Choices of Initial Human Capital Endowments and New Venture Success * The founder (team)'s human capital is a vital determinant of future firm performance. This is a stylized fact. Less is known about the effect of the human capital of the initial workforce hired by the founder(s). We study the performance consequences of a founder's choice of the initial workforce's human capital (quantity and quality), besides the human capital of the founder(s). The analysis is based on matched employer-employee data and covers about 5,300 startups in manufacturing industries founded by individuals coming from employment between 1992 and 2007. We acknowledge that initial hiring decisions are endogenous and correlated with the human capital of the founders and the ownership structure of startups (single founder versus team of founders). Given the stickiness of initial choices, human capital decisions at entry turn out to be a close to irreversible matter with significant implications for post-entry survival and growth of the firm.

Strategic Management Review, 2021

This essay emphasizes that the key determinants of redeployment decisions-adjustment costs and tr... more This essay emphasizes that the key determinants of redeployment decisions-adjustment costs and transaction costs-are illuminated by consideration of the sources of resource specificity. Building on prior work separating the degree of a resource's firm specificity and usage specificity, we develop a set of novel propositions on the conditions under which headquarters are more likely to withdraw a resource from a declining market and transfer it to a more attractive one. First, we clarify how usage specificity and business relatedness may interact in determining adjustment costs. Second, we examine how firm specificity and market transaction costs may interact in determining the use of resource redeployment. Third, we integrate the dimensions of usage-and firm-specificity into our framework explaining redeployment decisions. Overall, this essay contributes to an improved understanding of the self-selection processes of redeployment decisions and provides managers with a framework to evaluate particular resources as potential candidates for internal redeployment in the course of corporate renewal.

Organizational Research Methods, 2018

* This version of the article has been accepted for publication and undergone full peer review bu... more * This version of the article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the publisher's final version AKA Version of Record.

Strategic Management Journal, 2018

Combining studies on real options theory and economic short-termism, we propose that, depending o... more Combining studies on real options theory and economic short-termism, we propose that, depending on CEOs' career horizons, CEOs have heterogeneous interests in strategic flexibility and, thus, have different incentives to make real options investments. We argue that compared to CEOs with longer career horizons, CEOs with shorter career horizons will be less inclined to make real options investments because they may not fully reap the rewards during their tenure. In addition, we argue that long-term incentives and institutional ownership will mitigate the relationship between CEOs' career horizons and real options investments. U.S. public firms as an empirical setting produced consistent evidence for our predictions. Our study is the first to theoretically explain and empirically show that a CEO's self-seeking behavior will impact real options investments. Managerial Summary This paper helps to explain how a CEO's self seeking-behavior may shape a firm's real option investment, which could result in different level of strategic flexibility. We argue that CEOs with short career horizons have less time to exercise their firms' real options, which should lower the investments in the firms' real options portfolios relative to CEOs with long career horizons. We study a sample of U.S. public firms and find strong evidence that a CEO's expected tenure in the firm is positively related to the real options investments at the firm level. We find that this agency issue can be mitigated by adopting appropriate corporate governance mechanisms such as long-term incentives and institutional investors.

SSRN Electronic Journal, 2017

This paper develops and tests a model where the performance of an entrepreneur as employee explai... more This paper develops and tests a model where the performance of an entrepreneur as employee explains why she/he decides to venture outside the industry of the parent firm and what are the implications of this type of entry choice on the initial size of the founded firm. Our findings:(1) assist in building a more nuanced theoretical understanding of how individuals determine type of entry, and initial size; (2) have implications for how we interpret the relationship between employee performance and entrepreneurial entry process; and (3) suggest initial size as an important mechanism behind the performance advantage of spinouts.

The Palgrave Encyclopedia of Strategic Management, 2016

Strategic Entrepreneurship Journal, 2014

This paper discusses the scholarly work of Arnold C. Cooper. He was an influential pioneer in the... more This paper discusses the scholarly work of Arnold C. Cooper. He was an influential pioneer in the study of entrepreneurship, strategic management, and technology management, and his work provided an important foundation for subsequent development in those fields. Many of his contributions are a result of methodological approaches to gathering data, enabling him to draw insights from systematic empiricism of phenomena. Many of his most influential works are discussed and linked to subsequent work, including work emanating from this journal. Future research opportunities tied to his work are also elaborated.

Journal of Business Venturing, 2016

We examine the influence of private equity, in particular angel groups and venture capital (VC) i... more We examine the influence of private equity, in particular angel groups and venture capital (VC) investments, in shaping the innovation of technology ventures and in realizing successful exits. We consider the theoretical and empirical implications of angel group investment and isolate the separate influences of angels and VCs towards a venture's innovation strategy and successful exit, revealing striking insights about their relative contribution. We do so by tracking 350 technology ventures that receive angel group and VC investment. The methodologies employed econometrically control for identification issues in the dynamic multistage nature of external capital financing.

Academy of Management Proceedings, 2013

It is well recognized that organizations attain “status” or prestige by affiliating with notable ... more It is well recognized that organizations attain “status” or prestige by affiliating with notable partners or institutions, and that there are clear benefits to high status positions. We are interested in an obvious extension to this observation – what are the organizational limits to status? Why is not status overexploited by affiliates? These questions invite consideration that decisions to exploit status in new products might hinge not purely on the benefits of status, but also its impact on operating costs and opportunity costs. Opportunity costs may arise because overexploitation of status may result in formal or informal sanctions by institutions governing affiliations. Using a structural model, we deduce how status separately affects price, operating cost, and opportunity cost. We also uncover that prior research may understate the benefits to status because it ignores that exploitation decisions are endogenous to status. Our empirical context is new product introductions in the Italian Wine industr...

Research Methodology in Strategy and Management

I am interested in clarifying the discussion of how researchers might try to isolate real option ... more I am interested in clarifying the discussion of how researchers might try to isolate real option effects to identify whether managerial decisions are guided by a real option heuristic. If we are to claim that the theory of real options illuminates managerial behavior, then as a field, we must converge on an understanding as to what constitutes a real option effect, and what does not. The discussion centers on hypothesis development, measurement issues, and research methodology.

Strategic Management Journal, 1998

... of activities than 'exploitation' for firms in dynamic envi... more ... of activities than 'exploitation' for firms in dynamic environments characterized by short life cycles and ... Also escalating technological uncertainty was the undeveloped regulatory process. ... or missing data and transactions involving academic or govern-ment agencies, the final ...

Strategic Entrepreneurship Journal, 2007

Industrial and Corporate Change, 2009

In this article, we examine whether the option value of keeping an operation alive will deter fir... more In this article, we examine whether the option value of keeping an operation alive will deter firms from exiting an industry. We find that uncertainty dissuades firms from exiting an industry, but only when the sunk costs of entering and exiting that industry are sizeable. Moreover, we argue and find that sunk costs can be influenced by the technological intensity of an industry, by the extent to which a firm competes on the basis of innovation, and by the firm's diversification strategy.

ics.purdue.edu

Our paper elaborates the effects that relatedness has on the value of a multi-business firm. We e... more Our paper elaborates the effects that relatedness has on the value of a multi-business firm. We emphasize that the value results from a dynamic use of benefits of contemporaneously sharing of resources and redeployability of resources to an alternative market. This view extends static and separate considerations of advantages of contemporaneous sharing and resource redeployability. We use a dynamic valuation model to explicate how relatedness influences value of a multi-business firm. We formally evaluate the impacts of the two effects of relatedness. This explication enables us to demonstrate how each independently and jointly affects value. In this sense, we illuminate value in multi-business firms that has been previously undiagnosed. In addition to providing theoretical insight, our results have important empirical and managerial implications.