Taking a Second Look in a Warped Crystal Ball: Explaining the Accuracy of Revised Forecast
Journal of Management Studies, May 6, 2016
45 Pages Posted: 2 Sep 2016
Date Written: May 6, 2016
The fundamental questions we address are whether firms with a higher initial forecasting ability are able to accurately revise the exit forecasts of their investments; and how co-investment partners and value-adding commitment with their investment influence the main effect. We explore these questions with novel and unique data collected via mixed research methods on venture capital firms’ forecasts of 114 portfolio companies. We find that venture capital firms that are better at making initial forecasts are less effective in revising their forecasts. In addition, while the number of co-investment partners positively moderate this relationship, venture capital firms’ value-adding commitment moderates it negatively. Our findings contribute to the literature on organizational forecasting as well as inter-organizational knowledge transfer and knowledge creation. They also provide novel insights into venture capital literature and practice.
Keywords: forecasting, syndication, value-adding commitment, venture capital
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