Effects of relational capital and commitment on venture capitalists' perception of portfolio company performance |
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| Institution: | 1. Hohenheim University, Chair of Corporate Finance, Wollgrasweg 49, 70599 Stuttgart, Germany;2. ZEW Mannheim, Department of International Finance and Financial Management, Germany;3. Leuphana University, Nord/LB Chair of Integrated Financial Risk Management, Scharnhorststr. 1, 21335 Lüneburg, Germany;4. University of Groningen, Faculty of Economics and Business, The Netherlands;1. Washington State University, Carson College of Business, United States;2. Oregon State University, College of Business, United States;3. Indiana University, Kelley School of Business, United States;4. Willamette University, Atkinson Graduate School of Management, United States;1. University of Passau, Department of Business and Economics, 94030 Passau, Germany;2. Cranfield School of Management, College Road, Cranfield MK43 0AL, United Kingdom;3. SKEMA Business School – Université Côte d''Azur, SKEMA Business School, Department of Finance and Accounting, Avenue Willy Brandt, 59777 Euralille, France |
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| Abstract: | In this study, we examine how relational capital and commitment affect a venture capital firm's (i.e., VCFs) perception of the performance of its portfolio companies (i.e., PFCs). That is, we examine how perceived performance is affected by the social nature of the relationship between the VCF and PFC. The study's hypotheses are tested by applying quantitative analyses to survey data collected from 298 U.S.-based venture capital firms. The data from the survey are complemented with additional information drawn from secondary data sources and interviews with several venture capitalists. We found that the amount of relational capital embedded in the VCF–PFC dyad and the extent to which the VCF is committed to the PFC are strongly related to perceived performance. We speculate that relational capital and commitment enhance learning, an effect that increases VCFs' perceptions of performance. Further, these perceptions of performance will also be amplified by the positive affect generated by relational capital and commitment. We discuss the limitations and contributions of our findings and provide directions for future research. |
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