Requisite expertise, firm reputation, and status in venture capital investment allocation decisions

Dimo Dimov; Dean A. Shepherd; Kathleen M. Sutcliffe

doi:10.1016/j.jbusvent.2006.05.001

Requisite expertise, firm reputation, and status in venture capital investment allocation decisions

Dimo Dimov, Dean A. Shepherd, Kathleen M. Sutcliffe

Management

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Abstract

Drawing together research in the upper echelon perspective, strategy, and organizational sociology, this paper examines (1) the relationship between the finance expertise of a venture capital (VC) firm's management team and investment selection, and (2) the moderation of this relationship by the VC firm's social position. We find that while finance expertise is associated with a lower proportion of early-stage investments, this relationship is weaker for firms with high reputation and stronger for firms with high status. We conclude with a discussion of the importance and nuances of external image considerations on investment decisions as well as insights into the importance of the requisite nature of expertise.

Original language	English
Pages (from-to)	481-502
Number of pages	22
Journal	Journal of Business Venturing
Volume	22
Issue number	4
DOIs	https://doi.org/10.1016/j.jbusvent.2006.05.001
Publication status	Published - 1 Jul 2007

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10.1016/j.jbusvent.2006.05.001

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NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Business Venturing. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Business Venturing, vol 22, issue 4, 2007 DOI 10.1016/j.jbusvent.2006.05.001
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AU - Shepherd, Dean A.

AU - Sutcliffe, Kathleen M.

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N2 - Drawing together research in the upper echelon perspective, strategy, and organizational sociology, this paper examines (1) the relationship between the finance expertise of a venture capital (VC) firm's management team and investment selection, and (2) the moderation of this relationship by the VC firm's social position. We find that while finance expertise is associated with a lower proportion of early-stage investments, this relationship is weaker for firms with high reputation and stronger for firms with high status. We conclude with a discussion of the importance and nuances of external image considerations on investment decisions as well as insights into the importance of the requisite nature of expertise.

AB - Drawing together research in the upper echelon perspective, strategy, and organizational sociology, this paper examines (1) the relationship between the finance expertise of a venture capital (VC) firm's management team and investment selection, and (2) the moderation of this relationship by the VC firm's social position. We find that while finance expertise is associated with a lower proportion of early-stage investments, this relationship is weaker for firms with high reputation and stronger for firms with high status. We conclude with a discussion of the importance and nuances of external image considerations on investment decisions as well as insights into the importance of the requisite nature of expertise.

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Requisite expertise, firm reputation, and status in venture capital investment allocation decisions

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