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Entrepreneurship research shows need for strong pitch

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Steve Snyder, interim chair of the Department of Theatre Arts, left, acted out various levels of impression management behaviors on video for Dr. Brian Nagy, assistant professor of management, and his co-researchers studying how these behaviors affect entrepreneurial success.

Watching TV and conducting experiments are not methods typically used in entrepreneurship research. However, Dr. Brian Nagy, assistant professor of management, utilized these techniques to examine entrepreneurs’ behaviors.

In two studies published in Entrepreneurship Theory and Practice, Nagy and his co-researchers found evidence suggesting that entrepreneurs who are prepared, who demonstrate numerous credentials and who show themselves in a positive light through impression management behaviors fare significantly better with potential investors, customers and employees than those who don’t.

In “Preparedness and Cognitive Legitimacy as Antecedents of New Venture Funding in Televised Business Pitches,” the researchers examined data from two popular TV shows, Shark Tank and Dragon’s Den, which focus on entrepreneurs in search of venture capital.

Results from this study suggest entrepreneurs who show clear signs of preparedness and understanding of their business ventures are perceived as significantly more legitimate and receive more funding than those who don’t, regardless of the project.

The study is the first to use reliable data from an unscripted TV show to evaluate entrepreneurs’ pitches.

“Demonstrating preparedness and telling an interesting story allow entrepreneurs to indicate to potential investors that their new ventures are viable companies because they were founded by intelligent individuals who have done their homework,” Dr. Nagy says.

In the second study, “The Influence of Entrepreneurs’ Credentials and Impression Management Behaviors on Perceptions of New Venture Legitimacy,” Nagy and his co-researchers examined data collected from an experiment in which they manipulated an entrepreneur’s presentation behaviors and credentials.

Serving as a nascent entrepreneur, Steve Snyder, interim chair of the Department of Theatre Arts, acted out various levels of three impression management behaviors: ingratiation, self-promotion and exemplification. Eighty potential investors watched one of three videos of Snyder and then rated the legitimacy of his proposed business and its worthiness of financing.

“While we hypothesized there can be ‘too much of a good thing’ — too much flattery, for example — we never found that. The more of these behaviors the entrepreneur enacted during the few minutes allowed to pitch the business, the better the potential investors perceived him,” Dr. Nagy says.

Results of this study also suggest potential investors pay close attention to entrepreneurs’ credentials, usually demonstrated using evidence of education, knowledge of the industry and work experience.

“This study is unique because it is one of the first experiments published in the entrepreneurship literature,” Dr. Nagy says. “Everything was controlled except two factors: the varying levels of the entrepreneur’s behaviors and his credentials. By designing the study in this manner, we can begin to argue cause and effect.”

The implications of the two studies for budding entrepreneurs, he adds, are that entrepreneurs must consider and hone their behaviors before interacting with potential investors and other potential stakeholders. In addition, “overdoing it” during the couple of minutes required to pitch a business may not be an issue. 

“It’s of paramount importance for entrepreneurs to be fully prepared and also to shine a positive light on themselves through impression management behaviors during the short amount of time they are given to pitch their businesses,” Dr. Nagy says. “A good first impression is critical.”