Firm and Group Influences on Venture Capital Firms Involvement in New Ventures

26 Pages Posted: 20 Sep 2008

See all articles by Dirk De Clerq

Dirk De Clerq

Brock University - Faculty of Business

Harry J. Sapienza

University of Minnesota - Twin Cities - Carlson School of Management

Akbar Zaheer

University of Minnesota - Twin Cities - Carlson School of Management

Abstract

Drawing on expectancy, equity, and collective effort theories, we argue that the level of involvement of individual firms in multifirm alliances depends on both individual firms self-focused interests and factors stemming from the firms membership in the alliance group. We apply our theoretical arguments to the context of venture capital syndicates and test the hypotheses using data about 160 venture capital firms (VCFs) drawn from a survey instrument and a secondary data source. The results show that individual firms involvement in a multifirm alliance is somewhat dominated by group effects; specifically, financial stake relative to that of the group and the reputation of the other group members significantly influence the focal firm's involvement. However, focal firms involvement relates negatively to their own reputation. We discuss the implications of these findings for future research. Our results imply that firms in multiparty alliances pay attention to the characteristics of their alliance partnership to calibrate their own behaviour. In our specific setting, VCF involvement in syndicates depends more on relative syndicate characteristics than on the focal firm's absolute level of investment. Further, because reputation is negatively associated with involvement, entrepreneurs and potential syndicate entrants should ensure that they fully leverage VCF reputation to achieve their goals.

Suggested Citation

De Clercq, Dirk and Sapienza, Harry J. and Zaheer, Akbar, Firm and Group Influences on Venture Capital Firms Involvement in New Ventures. Journal of Management Studies, Vol. 45, Issue 7, pp. 1169-1194, November 2008. Available at SSRN: https://ssrn.com/abstract=1270877 or http://dx.doi.org/10.1111/j.1467-6486.2007.00764.x

Dirk De Clercq (Contact Author)

Brock University - Faculty of Business ( email )

St. Catharines, Ontario L2S 3A1
Canada

Harry J. Sapienza

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Akbar Zaheer

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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