Research on user entrepreneurship by Masatoshi Kato, Professor, School of Economics and his co-author has been published in Economics of Innovation and New Technology

Chong Yu, Ph.D. Student at the Graduate School of Business Administration, and Masatoshi Kato, Professor in the School of Economics and Director of the Research Center for Entrepreneurship (RECENT), Kwansei Gakuin University, have published research findings on the signaling effects of user entrepreneurship in start-up financing. This research was published in June 2026 in Economics of Innovation and New Technology.

Drawing on signaling theory, their research examines how investors evaluate "user entrepreneurs" — founders who commercialize innovations born from their own experience as users of a product or service — when these firms seek start-up capital. Because a founder's user experience represents an unobservable form of demand-side human capital, it can only be conveyed to outside investors through observable, costly actions that function as signals. Analyzing original survey data on Japanese start-ups, the study found that founders with professional user experience were significantly more likely to raise external capital — particularly through equity financing — than founders without user experience, whereas founders whose user experience came from ordinary consumer use (end-user entrepreneurs) showed no significant difference from non-user entrepreneurs. This suggests that professional user experience operates as a high-commitment signal that more effectively reduces information asymmetry with investors than other forms of user experience.

Start-up financing is often hampered by information asymmetry, in which promising ventures struggle to credibly convey their potential to outside investors, sometimes causing valuable businesses to miss out on the capital they need to grow. This research shows that being innovative alone is not enough to secure funding — it must be backed by a credible signal of quality rooted in the entrepreneur's human capital. The findings are expected to help entrepreneurs think more carefully about which aspects of their background and experience to highlight, while also offering venture capitalists and other financiers a new lens for identifying promising founders. Building on these findings, the researchers plan to continue investigating how the businesses founded by user entrepreneurs subsequently grow and develop over time.

Journal: Economics of Innovation and New Technology
Article title: To be innovative is not enough: the signaling value of user entrepreneurship in start-up financing
Author: Chong Yu, Masatoshi Kato
DOI: 10.1080/10438599.2026.2678935