High-growth entrepreneurial ventures, increasingly take public stances on controversial sociopolitical issues that do not directly impact their business interests. However, unlike established firms who research suggests will be punished by investors for engaging in corporate sociopolitical activism (CSA), anecdotal evidence suggests entrepreneurial ventures may actually benefit therefrom. Blending signaling and identity theories, we argue that investors will respond positively to entrepreneurial ventures’ CSA because as it sends quality signals to investors regarding ventures’ emerging brand identity, as well as their ability to attract a larger total addressable market. We also assert that investors will be more inclined to respond positively to the CSA of ventures early in their lifecycle than in later stages. Furthermore, we argue that the signaling effect of CSA is weaker when ventures already provide other quality signals, suggesting a crowding out effect. We test our theory using a novel dataset of US unicorns from 20. Our results support our theorizing. This work extends entrepreneurship literature through demonstrating that nonmarket engagement can promote venture growth. It also contributes to the nascent CSA literature by elucidating one of the instances in which investors respond positively to this emergent nonmarket strategy.
