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The interplay of need and opportunity in venture capital investment syndication


Reference:

Dimov, D. and Milanov, H., 2010. The interplay of need and opportunity in venture capital investment syndication. Journal of Business Venturing, 25 (4), pp. 331-348.

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    Official URL:

    http://dx.doi.org/10.1016/j.jbusvent.2009.01.002

    Abstract

    This study examines the syndication of investments novel to a VC firm as a function of the firm's need and opportunity to do so. We distinguish two types of uncertainty that firms face when considering novel investments: egocentric, pertaining to making the right decisions, and altercentric, pertaining to being evaluated as a potential partner on the investment. Whereas the former increases the firm's need to syndicate the investment, the latter reduces the firm's opportunity to do so, making it contingent upon the firm's status and reputation for attracting potential partners. Using data on first-round venture capital investments, we find that novel investments are more likely to be syndicated. Moreover, this relationship is stronger for firms with higher status and weaker for firms with higher reputation. These results highlight a relational aspect of uncertainty, inherent in a particular VC firm - investment dyad, and suggest that status and reputation play different roles in aligning the need and opportunity to syndicate novel investments.

    Details

    Item Type Articles
    CreatorsDimov, D.and Milanov, H.
    DOI10.1016/j.jbusvent.2009.01.002
    DepartmentsSchool of Management
    Publisher StatementDimov_J_Business_Venturing_2010_25_4_331.pdf: 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 25, issue 4, 2010, DOI 10.1016/j.jbusvent.2009.01.002
    RefereedYes
    StatusPublished
    ID Code32461

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