Latest Seminars

Into the Great Unknown: When Expressing More Uncertainty Improves Entrepreneurial Financing Outcomes

Entrepreneurial firms usually try to reduce the amount of uncertainty they express when communicating with prospective investors. However, we propose that in nascent markets, where what it takes to succeed is often not yet known, expressing more uncertainty may actually be beneficial. Drawing on research that shows expressing uncertainty about unknowable outcomes builds trust by conveying competence and honesty, we argue that firms in nascent settings that express more uncertainty will enjoy more favorable financing outcomes. Studying the nascent market of special purpose acquisition companies (SPACs) in the United States from 2003 to 2019, we show that firms that expressed more uncertainty in their prospectuses had a higher likelihood of securing financing. We then show that as knowledge about what it takes to be successful in this market increased— at both the market- and firm-level—the positive effect of conveying uncertainty diminished and eventually turned negative. This study expands our understanding of the role of uncertainty in entrepreneurship, offers deeper insight into how language operates in financial markets, and sheds light on an increasingly popular but understudied entrepreneurial vehicle.


Speaker :
Prof. Ivana Naumovska, INSEAD
Venue :
via Zoom
Date :
Time :