79th Academy of Management Annual Meeting
Increasing attention has been devoted to firms’ entrepreneurial orientation (EO) as expressed in their communications with stakeholders. However, whether investors value entrepreneurially- oriented rhetoric is unclear. Building on signaling theory, we posit that entrepreneurially-oriented rhetoric may raise investor concerns when pre-entry uncertainties and post-entry risks are common, such as in regulated contexts. We analyze data of 109 health science firms operating in the U.S. during 2003-2012 and find a negative relationship between EO, as communicated in shareholder letters, and firm value. Nonetheless, stronger signals of entry commitment and social responsibility improve the effect of entrepreneurially- oriented rhetoric on firm value. These findings suggest that investors skeptically react to EO expressions by regulated firms, though quality signals may lessen their concerns with firms’ pre- entry uncertainties and post-entry risks.