If investors cannot perceive differences among ventures, how can they decide which ventures to support? By marrying signaling theory with the legitimate distinctiveness literature, I argue that a pooling equilibrium—a context wherein investors cannot discriminate higher quality signalers from lower quality signalers due to unreliable signals—will limit the benefits of differentiation (e.g., an innovation that differentiates from peers) as a resource acquisition strategy. In this regard, I argue that the type of equilibrium present will moderate the relationship between legitimate distinctiveness and access to resources.

Following the legitimate distinctiveness literature, I theorize that the benefits of legitimate distinctiveness depend on the possibility of actually being able to establish perceptions of both conformity and distinctiveness in the minds of audiences. That is, if an environment is such that audience members cannot perceive one or both properties, legitimate distinctiveness cannot be established, and benefits may not be forthcoming. Thus, I argue that the benefits accrued from legitimate distinctiveness to increase access to resources will hold in a separating equilibrium; but in a pooling equilibrium different dynamics may be at play. I, thus, theorize that the presence of a pooling equilibrium limits the effect of legitimate distinctiveness on private equity funding because investors cannot perceive differentiation signals to discriminate higher quality ventures from lower quality ventures.

This dissertation contributes to signaling and entrepreneurship literature by being one of the first studies to explore a pooling equilibrium in the entrepreneurial process. This dissertation also relieves the tension in the conformity versus distinctiveness paradox, by suggesting that the signaling context significantly influences this decision for entrepreneurs, contributing to the integration of institutional theory and strategic management. I find support for my theorizing. In particular, the positive effect of distinctiveness and conformity on increased access to resources when assuming the existence of a separating equilibria. In a pooling equilibrium, though, the positive relationship between conformity and access to resources is supported, while post hoc analysis reveals the negative relationship between distinctiveness and access to resources.