Quotation Wuebker, Robert, Hampl, Nina, 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 (SEJ) 9 (2), 167-187.


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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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Strategic Entrepreneurship Journal (SEJ)
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, MAN-A, STRAT-A, WH-A
Language English
Title 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
Volume 9
Number 2
Year 2015
Page from 167
Page to 187
Reviewed? Y
URL http://onlinelibrary.wiley.com/doi/10.1002/sej.1188/abstract
DOI http://dx.doi.org/10.1002/sej.1188

Associations

People
Hampl, Nina (Details)
External
Wuebker, Robert
Wüstenhagen, Rolf
Organization
Strategic Management IN (Details)
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