Virtuous Startups: The Credentialing Power of the Startup Label

Although startup companies have generated widespread public enthusiasm for their contributions to society, they have also recently been implicated in numerous scandals for their morally questionable behavior. Across six studies, we investigate people's perceptions of startup companies and examine how people evaluate a startup's morally questionable behavior. We find evidence for a "virtuous stereotype, " such that companies associated with the startup label are perceived as more virtuous than established companies (Study 1a). As a result, startups receive less moral condemnation than established companies for their morally ambiguous behavior (Study 1b and Study 1c)-an effect that does not seem to spill over onto nonmoral transgressions (Study 2a). In addition, startups elicit less disapproval when their transgression is morally ambiguous compared to morally unambiguous, suggesting that, when possible, observers provide a benign justification for the startup's transgression (Study 2b). Finally, we find that people prefer not to morally scrutinize the behavior of startups when given a choice (Study 3). Overall, these results suggest that the simple label of "startup " may endow a firm with moral credentials that lead observers to give startups the benefit of the doubt when they transgress.