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

Industrial and Corporate Change, 21(1): 151-185.

50 Pages Posted: 29 Nov 2011 Last revised: 29 Oct 2012

See all articles by Christopher I. Rider

Christopher I. Rider

University of Michigan, Ross School of Business

Anand Swaminathan

Emory University

Date Written: October 13, 2011

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.

Keywords: organizational theory, mortality, venture capital, entrepreneurship

JEL Classification: L20, L21, G24

Suggested Citation

Rider, Christopher I. and Swaminathan, Anand, They Just Fade Away: Mortality in the U.S. Venture Capital Industry (October 13, 2011). Industrial and Corporate Change, 21(1): 151-185., Available at SSRN: https://ssrn.com/abstract=1966070 or http://dx.doi.org/10.2139/ssrn.1966070

Christopher I. Rider (Contact Author)

University of Michigan, Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

HOME PAGE: http://https://michiganross.umich.edu/faculty-research/faculty/christopher-rider

Anand Swaminathan

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

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