ABSTRACT Title of dissertation: DO INVESTOR CAPABILITIES INFLUENCE THE INTERPRETATION OF ENTREPRENEUR SIGNALS? THEORY AND TESTING IN THE PRIVATE EQUITY SETTING

Informing outsiders of the potential and quality of the organization in a way that will benefit the organization and avoid putting it at risk is a challenging task in competitive settings. Under conditions of uncertainty, in which external entities are imperfectly informed about the organization, outsiders will seek for signals of quality. Current research of interfirm signaling has focused on the sender’s ability to generate signals. In this dissertation, I propose that receivers of signals are heterogeneous in their ability to interpret signals and that this heterogeneity significantly influences the outcome of the interaction between signaler and interpreter. I apply this insight in an entrepreneurial setting to explain differences in signaling to venture capitalist and informal private equity investors (business angels) over the early stages of a firm’s lifecycle. The findings have strong implications for entrepreneurial firms ’ strategy and, generally, to signaling theory. I argue that signals are multifaceted. Outsiders may base their decisions on two aspects of signal: the informative aspect, which relays direct information on the capabilities of the organization; and, the legitimizing aspect, which conveys legitimac