Session 54

Venture capital and angel financing

Track K

Date: Tuesday, October 6, 2015

 

Time: 08:00 – 09:15

Common Ground

Room: Plaza Court 4


Facilitator:

  • Curtis Moore, West Virginia University

Title: Blazing an Uncertain Trail: Venture Capital Firms’ Investment Trajectories in the Emerging Clean Energy Sector

Authors

  • Anu Wadhwa, Imperial College London
  • Xin Yao, University of Colorado-Boulder
  • Antoaneta Petkova, San Francisco State University

Abstract: This study investigates the effects of uncertainty and firm endowments on venture capital firms’ strategies when investing in emerging sectors. Using real options logic, we theorize that greater level of uncertainty increases VC firms’ propensity to spread their investments across multiple new technologies, and that such effects are mitigated by firm endowments. Our empirical investigation of the strategies of 172 U.S. VC firms that invested in the emerging clean energy sector during the period 1990-2008 provides some support for these arguments. Our study contributes to entrepreneurship theory and practice by examining the interplay between uncertainty and firm endowments in influencing VC investment strategies in emerging sectors.

Title: Decentralized Organizational Resource Allocation and Information: Angel Investments by Venture Capital Partners

Authors

  • Andy Wu, Harvard University

Abstract: We study the role of information in organizational decision-making for the financing of entrepreneurial ventures. We formally model a decentralized set of agents who vote strategically to allocate resources to a project with unknown outcome; they can each acquire costly information to improve their decision quality. We test our predictions in the setting of venture capital, where partners make their own angel investments outside of their employer. We find that the venture capital partners, acting independently, make riskier investments into younger firms with less educated and younger founding teams, but these investments perform better on some metrics even when controlling for investment size and stage. Geographic distance and liquidity constraints increase the probability the investment is taken up by a partner and not the VC.

Title: Explaining Performance Differentials Among Venture-Backed Startup Firms: How Much does Region Matter?

Authors

  • Siddharth Vedula, Babson College
  • Markus Fitza, Frankfurt School of Finance and Management

Abstract: We use a variance decomposition approach to assess the extent to which regional factors explain performance differentials among venture-backed startups. Drawing on evolutionary arguments, we also examine the contingent effects of business development stage and industry sector maturity on the magnitude of the “region effect”. Our findings indicate that regional factors have significant performance impacts on venture-backed startups that are at the earliest stages of development (explaining 14% of performance variance), and for startups that operate in nascent industry sectors (explaining 7% of performance variance). However regional effects are relatively less important for venture-backed startups with more developed business models, and for those that operate in mature industry sectors (explaining 2-3% of performance variance). We offer implications for theory, practice, and policy.

Title: Guilt by Association: The Delisting of VC-Backed Firms and their Influence on VC Reputation

Authors

  • David Gomulya, Nanyang Technological University
  • Peggy Lee, Arizona State University
  • Timothy Pollock, Penn State University

Abstract: In this study, we ask the questions: Do negative events spill over to affiliates’ reputations? And are there factors that mitigate or enhance negative reputation spillovers? We study this question in the context of venture capital (VC) backed public firms who are delisted from their stock exchange and examine their effects on the reputations of the VCs who funded them. We build on and contribute to the reputation literature and the concept of network contagion and reputation spillover effects.

Title: Technology Road Map by Open Innovation and Corporate Venture Capital

Authors

  • Hongryol Cha, Temple University

Abstract: Inter-organizational network is one way of utilizing the dispersed knowledge. In the prior researches, scholars have studied alliances, joint venture, and licensing as the source of inter-organizational network in terms of open innovation. However, we propose the Corporate Venture Captial (CVC) investment as an external knowledge extension and searches in the open innovation process. Our research questions are whether the parent firm’s innovation patterns influence to select portfolio companies and what the relationship between knowledge map of CVC portfolio companies and parent firms’ innovation patterns is. Using theories of open innovation and knowledge management, we conceptualize a theoretical model to explain the mechanism of selecting portfolio companies for the CVC investment. We also suggest testing the model empirically later, based on a mirroring hypothesis.

Title: VC Status and Startup Survival: A Difference-in-Differences Approach

Authors

  • Elisa Alvarez-Garrido, University of South Carolina
  • Isin Guler, Sabanci University

Abstract: Hochberg, Ljungqvist, and Lu’s (2007) paper published in the Journal of Finance showed that the status of venture capitalists correlates with higher survival rates and performance of the startups they invest in, result which is central both to the finance and strategy fields. We replicate this study in the biotechnology industry, where we can leverage a natural experiment: the early coding of the human genome. The results unveil a nuanced effect of VC status on startup survival: high status VCs foster startup survival in the later rounds, but in intermediate rounds high status VCs lead also to higher termination rates. However, VC status leads to higher performance.

All Sessions in Track K...

Sun: 08:00 – 09:15
Session 10: Entrepreneurship in Base-of-the-Pyramid Markets
Sun: 09:45 – 11:00
Session 11: Crowdfunding Research: Present and Future
Sun: 11:15 – 12:30
Session 12: Environmental Entrepreneurship: How and When do Entrepreneurs address Environmental Degradation?
Sun: 16:15 – 17:30
Session 50: Entrepreneurship and Institutional Environment
Sun: 17:45 – 00:00
Session 319: Entrepreneurship and Strategy Business Meeting
Mon: 08:00 – 09:15
Session 56: Family firms
Mon: 11:15 – 12:30
Session 119: Competition and entrepreneurial entry
Mon: 13:45 – 15:00
Session 53: New forms of entrepreneurial funding
Session 97: Accelerators, corporate VCs and new venture creation
Mon: 16:45 – 18:00
Session 59: Entrepreneurship in emerging markets
Session 98: Culture, institutions and entrepreneurship
Tue: 08:00 – 09:15
Session 54: Venture capital and angel financing
Session 118: Entrepreneurial orientation and strategic entrepreneurship
Session 217: Leadership and Governance in Family Firms
Tue: 11:00 – 12:15
Session 51: Academic entrepreneurship
Tue: 14:15 – 15:30
Session 58: Corporate VCs and spin-outs
Session 120: Creativity, knowledge spill overs and a venture's legitimacy
Tue: 15:45 – 17:00
Session 52: Entrepreneurial business models
Session 55: Entrepreneurship and cognitions
Tue: 17:30 – 18:45
Session 57: Entrepreneurial teams
Session 99: Governance and entrepreneurial finance


Strategic Management Society

Denver