Paper Number
ECIS2026-1877
Paper Type
CRP
Abstract
This study investigates how top management team’s AI literacy – executives’ ability to understand and apply AI – and AI orientation – the startup’s strategic focus on AI – influence startup funding performance. Drawing on Upper Echelons and Signaling Theory, we analyze a unique, multi-level dataset of 1,517 U.S. startups founded after the public release of ChatGPT, combined with biographical profiles from 4,075 founders. The dataset integrates PitchBook funding information with startups’ public communication and executive AI literacy derived from LinkedIn, linking observable AI capability signals with startup financing outcomes. We find that AI literacy significantly increases AI orientation, indicating that managerial cognition shapes strategic direction. However, AI-literate teams do not attract greater investor funding, revealing a paradox between internal capability and external perception. A strong AI orientation enhances cumulative and initial funding, yet interestingly reduces the likelihood of subsequent rounds, highlighting the value of early technical signals and their decay effect over time.
Recommended Citation
Nadarajah, Mukunthan; Keil, Samuel; Riehl, Kevin; Schuller, Jan; Bock, Carolin; and Schiereck, Dirk, "Microfoundations Of AI Orientation As Market Signal: Evidence On Startup Funding Performance" (2026). ECIS 2026 Proceedings. 6.
https://aisel.aisnet.org/ecis2026/digitrans/digitrans/6
Microfoundations Of AI Orientation As Market Signal: Evidence On Startup Funding Performance
This study investigates how top management team’s AI literacy – executives’ ability to understand and apply AI – and AI orientation – the startup’s strategic focus on AI – influence startup funding performance. Drawing on Upper Echelons and Signaling Theory, we analyze a unique, multi-level dataset of 1,517 U.S. startups founded after the public release of ChatGPT, combined with biographical profiles from 4,075 founders. The dataset integrates PitchBook funding information with startups’ public communication and executive AI literacy derived from LinkedIn, linking observable AI capability signals with startup financing outcomes. We find that AI literacy significantly increases AI orientation, indicating that managerial cognition shapes strategic direction. However, AI-literate teams do not attract greater investor funding, revealing a paradox between internal capability and external perception. A strong AI orientation enhances cumulative and initial funding, yet interestingly reduces the likelihood of subsequent rounds, highlighting the value of early technical signals and their decay effect over time.
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