Truth in the Lie: The Effect of Fear of Missing Out on Stakeholder Enrollment Susan Young
Overview During the pre-legitimate startup phase, ventures often need resources such as financing, marketing or product development capabilities, additional human capital, or access to important networks. Stakeholder enrollment is the process by which these entrepreneurs create a deeper psychological bond with stakeholders to secure superior resources and legitimacy. By providing access to such resources, these enrolled stakeholders gain power over entrepreneurs. Stakeholder theory suggests that dishonest ventures will struggle with stakeholder enrollment, thus limiting access to resources and resulting in failure. Yet cases exist where unethical entrepreneurs do enroll stakeholders through deceit, provoking the research question: Why are enrolled stakeholders so willing to accept entrepreneurial lying? We propose that “fear of missing out” (FOMO) on an opportunity aids stakeholder enrollment by encouraging acceptance of information asymmetry in order to stay enrolled, where stakeholders remain purposefully heedless of entrepreneurial behavior, consequently reversing the original power asymmetry between stakeholder and entrepreneur. We examine Theranos, a biotech firm that convinced stakeholders it would revolutionize healthcare, rising to a $10 billion valuation through 15 years of sustained deceit. We contribute to theory by demonstrating this dark side of stakeholder enrollment, where opportunism increases a venture’s power over stakeholders, and deceit can endure long past the startup phase.
34 | Summer Research Fellowship
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