The Effects of Intra- and Extra-Industry Networks on Performance: A Case of Venture Capital Portfolio Firms

Managerial and Decision Economics (Forthcoming)

46 Pages Posted: 1 Mar 2019 Last revised: 19 May 2019

See all articles by Cristiano Bellavitis

Cristiano Bellavitis

Auckland Business School, Management and International Business

Igor Filatotchev

City University London - Sir John Cass Business School

Dzidziso Samuel Kamuriwo

City University London

Date Written: February 11, 2019

Abstract

This study examines the influence of intra- and extra-industry networks on firm performance by using data on 1264 UK venture capital (VC) backed start-up companies. The ventures’ network was operationalized by connecting together the various portfolio companies sharing the same investor. Regression results show that the venture’s network has a strong impact on firm’s success. Yet, whereas extra-industry ties are directly and positively linked to the likelihood of the venture to reach a successful exit, intra-industry ties exert a negative impact on companies’ performances. However, interaction effects show that once a firm establishes a sufficient number of extra-industry ties, it is able to profit from the network in its industry of operation. Overall, these findings show that an optimal balance of ties is achieved through a diverse set of connections incorporating both intra- and extra-industry ties.

Keywords: ties, networks, venture capital, entrepreneurial finance, venture, success

JEL Classification: M13

Suggested Citation

Bellavitis, Cristiano and Filatotchev, Igor and Kamuriwo, Dzidziso Samuel, The Effects of Intra- and Extra-Industry Networks on Performance: A Case of Venture Capital Portfolio Firms (February 11, 2019). Managerial and Decision Economics (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3332756 or http://dx.doi.org/10.2139/ssrn.3332756

Cristiano Bellavitis (Contact Author)

Auckland Business School, Management and International Business ( email )

12 grafton rd
Auckland
Auckland, Auckland 0000
New Zealand

Igor Filatotchev

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Dzidziso Samuel Kamuriwo

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

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