Reading Tea Leaves Through a Warped Crystal Ball: How Experience and Divergence from Organizational Routines Influence Forecasts

Abstract

Strategic management research highlights how routines can enhance efficiency and ultimately serve as a source of competitive advantage. However, there has been little research on the divergence from routines and how this might impact perceptions of strategic investments. Here, we explore how firms evaluate performance prospects for high-risk innovative investments using a survey of 23 French venture capital funds investing in over 300 startup firms. We test whether past experience and non-routine interventions influence fund managers' assessments of future performance for each startup of their portfolio. Findings suggest that positive past experience and suspension of investment management routines positively influence assessments of future prospects. These results entail important theoretical and epistemological consequences for future strategic management research.