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The Strength of Strong Ties in an Emerging Industry: Experimental Evidence of the Effects of Status Hierarchies and Personal Ties in Venture Capitalist Decision Making

Wuebker, Robert and Hampl, Nina and Wüstenhagen, Rolf (2015) The Strength of Strong Ties in an Emerging Industry: Experimental Evidence of the Effects of Status Hierarchies and Personal Ties in Venture Capitalist Decision Making. Strategic Entrepreneurship Journal, 9 (2). pp. 167-187. ISSN 19324391

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Abstract

Drawing from social network theory, scholars have identified two ways in which social ties influence venture capital investment decisions: directly through personal ties and indirectly through status hierarchies. Previous research has examined these effects independently. Our study is the first to perform a joint examination of the role of social ties and status hierarchies in venture capital decision making. We examine the relative importance of these two mechanisms through an adaptive choice-based conjoint experiment comprising of 3,132 investment decisions made by 86 venture capitalists from the United States and Europe. Our experimental context allows us to explore whether, under high levels of market uncertainty, strong personal ties exert more influence over investment decisions than the presence of a high-status investor in the deal. We also explore the moderating effects that market structure and experience play in shaping these decision processes. Our findings reveal that personal ties are more important in venture capital decision making when compared to the relative status of other venture capital firms participating in the investment syndicate. Building on our main findings, we show that the influence of personal ties is less pronounced in the European investment community, as compared to more densely networked U.S. investors. We also find a U-shaped relationship between venture capitalist experience and the influence of personal networks on investment decisions. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version requires a subscription. The original publication is available at http://onlinelibrary.wiley.com .
Keywords: venture capital / conjoint analysis / decision making / uncertainty / entrepreneurship
Divisions: Departments > Strategy and Innovation > Strategisches Management
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: Elena Simukovic
Date Deposited: 05 May 2015 09:18
Last Modified: 12 Dec 2016 22:02
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/70193/
URI: http://epub.wu.ac.at/id/eprint/4520

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