Pre-entry experience, knowledge inheritance, and entrepreneurial resource mobilization

Abstract

We study the conditions under which founders’ pre-entry experience in the industry affects the prospects of new ventures mobilizing financial resources. Drawing on signaling theory, we theorize that the signal value of pre-entry experience is contingent on the extent to which new ventures leverage such experience as well as the environmental context in which they operate. Specifically, we argue that knowledge linkages to founders’ former employer increase the clarity of the pre-entry experience signal. We further posit that this clarified pre-entry experience signal is more valuable in competitive environments. We investigate these effects by focusing on the time to first VC funding for startups in the US semiconductor industry. We show that (1) knowledge linkages to the founders’ previous employer accentuate the effect of pre-entry experience by further shortening the time to VC funding and (2) this shortening in time is more significant when the industry clustering is high.