They Just Fade Away: Mortality in the U.S. Venture Capital Industry

Abstract:     
Organizational mortality events are better understood than the process by which organizations cease to be. Complementing research on organizing, we theorize about disorganizing. We propose that disorganizing organizations attempt to avoid mortality by reducing audience engagement. We also propose that, typically, such behaviors only delay the inevitable because reduced engagement diminishes audience appeal which, in turn, raises mortality hazards. Analyzing life histories of 1,891 organizations that experience protracted mortality processes, we find support for our arguments. Reducing engagement increases the mortality hazard for venture capital firms by reducing the firm's appeal to co-investors, but gradual reductions attenuate the effects of reduced engagement on both mortality and appeal. We discuss implications of these findings for organizational theory, entrepreneurs, and institutional investors.

Number of Pages in PDF File: 50

Keywords: organizational theory, mortality, venture capital, entrepreneurship

JEL Classification: L20, L21, G24

Accepted Paper Series