Session Details: Session 1081

Venture Capital Investment: Worth the price?

Track K

Date: Wednesday, October 15, 2008

 

Time: 11:30 – 12:45

Paper

Room: Salon 4


Session Chair:
Daniel Forbes, University of Minnesota

Title: Behavioral Antecedents of CEO Turnover in Venture Boards

Authors

  • M. Audrey Korsgaard, University of South Carolina
  • Harry Sapienza, University of Minnesota
  • Daniel Forbes, University of Minnesota

Abstract: Most past work on the antecedents of CEO turnover has emphasized the importance of economic and socio-political considerations. Considerably less attention has been paid to the processes by which boards of directors interact. In this study, we focus on the interaction processes that unfold within the boards of venture capital-backed firms. In particular, we focus on two key dimensions of board interaction: the extent to which the board is involved in monitoring the CEO and the extent to which the board provides advice and counsel to the CEO, and we develop hypotheses about the effects of these behaviors on CEO turnover. We plan to test these hypotheses on a sample of 166 venture capital-backed firms.

Title: Competition for Venture Capital Attention: Fast Opportunity Selection under Conditions of Uncertainty

Authors

  • Azi Gera, Drexel University
  • Brent Goldfarb, University of Maryland
  • David Kirsch, University of Maryland

Abstract: We apply the attention-based view of the firm to the problem of fast decision making under conditions of uncertainty. Firms use comprehensive decision-making processes to reduce the risk embedded in decision making under conditions of uncertainty. However, in dynamic settings firms use fast decision-making. We theorize that under uncertainty in dynamic environments, firms base their decisions on salient signals of legitimacy rather then on in-depth analysis of information. We use the selection stage in the Venture Capital funding process to test our theory. Our findings show that social referrals serve as strong legitimizing signals. Previous research has shown that legitimizing signals affect the outcome of decision-making processes. We contribute to our understanding of decision-making processes by suggesting when such signals are beneficial and why.

Title: How Much Do Venture Capital Firms Matter For the Post-Investment Fates of Start-up Firms

Authors

  • Markus Fitza, Frankfurt School of Finance and Management

Abstract: Adding to the corporate effect literature, we study the effect of owners on firm performance in a new context, that of venture capital (VC) firms and the start-up firms in which they invest. In so doing, we hope to add to the literature that contextualizes ownership effects. This study makes two contributions. First we analyze the effect of different VCs on the post-VC-investment fates of start-up firms. How much does a particular VC’s involvement affect whether its portfolio companies are successfully sold (either on the IPO market or with a private acquisition) versus declare bankruptcy? Second, we extend the methodology that is frequently used in corporate effect literature by applying a variance decomposition approach to an ordinal regression.

Title: Smart Money? The Impact of Investor Mix on the Performance of New Ventures

Authors

  • Elisa Alvarez-Garrido, University of South Carolina

Abstract: Research has documented a wide variation in investor mix across firms, countries and industries. In this paper I ask whether investor mix affects firm’s performance. Both a relational view of the firm and the resource-dependence theory predict that those ventures that partner with investors with valuable resources will have a higher likelihood of experiencing a liquidity event. I test the hypotheses using a sample of 689 biotechnology firms from outside the U.S. founded between 1990 and 2004. I find that the greater the prior successful experience of the investors, the greater the likelihood of a liquidity event. I also find that the presence of a U.S. venture-capital firm in the syndicate increases the likelihood that the venture goes public when financial markets are less developed.

All Sessions in Track K...

Sun: 10:00 – 11:30
Session 1507: Strategic Entrepreneurship Journal and its Relation to Entrepreneurship and Strategy
Sun: 13:00 – 14:30
Session 1607: University Entrepreneurship
Mon: 11:15 – 12:30
Session 1080: Ready, Set, GO! Launch Strategy and Performance
Session 1082: Corporate Venture Capital
Mon: 15:30 – 16:45
Session 1085: Small Firm Strategy
Mon: 17:00 – 18:15
Session 1079: Entrepreneurship in Context: International and Institutional Influences
Tue: 11:15 – 12:30
Session 1078: Entrepreneurial Orientation
Session 1083: IPOs: Causes and Consequences
Tue: 14:30 – 15:45
Session 1094: Learning and Performace in New Ventures
Wed: 10:00 – 11:15
Session 1087: Networks and New Ventures
Session 1097: Raising Capital - Risky Business!
Wed: 11:30 – 12:45
Session 1081: Venture Capital Investment: Worth the price?
Session 1099: Entrepreneurship Theory: Emerging Views


Strategic Management Society

Cologne Conference