Unpacking functional alliance portfolios: How signals of viability affect young firms' outcomes

This article investigates how alliance portfolio composition affects young firms' outcomes. Drawing on signaling theory, we propose how alliance portfolio composition—number, functional domains (R&D, manufacturing, and marketing), and single‐purpose or multi‐purpose nature of alliances within the portfolio—may affect a firm's likelihood of achieving a liquidity event (IPO or acquisition). We study 8,600 U.S.‐based, VC‐backed firms during the period of 1990 to 2002 from 10 industry sectors. We find that alliance portfolios (to a certain extent) increase a firm's liquidity event likelihood. Further, firms with heterogeneous alliance portfolios, including portfolios emitting greater efficiency signals versus endorsement signals, are more likely to experience an IPO versus acquisition. Our findings lend support to the value of multi‐function alliances within portfolios. Copyright © 2013 John Wiley & Sons, Ltd.     

Relative standing and the performance of recently acquired European firms

This study draws on the concepts of relative standing to explain the post-merger performance of recently acquired European firms. We used a 2 × 3 sampling design where we surveyed top managers of British and French firms that were acquired by British, French, and U.S. firms as to their perceptions of cultural compatibility with the buying firms, their sense of loss of autonomy since the merger, and post-merger performance. While we found that the theory adequately explains the post-merger performance of both British and French firms, suggesting that this primarily ‘made-in-the-United States’ organization theory extends beyond the cultural domain of the United States, we also found an aspect of the theory that reflects a possible cultural bias. © 1997 by John Wiley & Sons, Ltd.     

The role of CEO relative standing in acquisition behavior and CEO pay

In this study, we develop and test a theory of CEO relative pay standing. Specifically, we propose that CEOs with negative relative pay standing status (underpaid relative to comparison CEOs) will engage in acquisition activity, as a self‐interested means of attempting to realign their pay with that of their peers. We further propose that, when CEOs with negative relative pay standing acquire, they will tend to finance those acquisitions more heavily with stock than cash, to mitigate the risk associated with those deals. Finally, we argue that acquisition activity will partially mediate the influence of CEO negative relative pay standing on subsequent CEO compensation increases; however, that pay growth will come primarily in the form of long‐term incentive pay. Our results support our predictions. Copyright © 2014 John Wiley & Sons, Ltd.     

Venture capitalists' decision to withdraw: The role of portfolio configuration from a real options lens

When does a venture capital firm withdraw from an investment project prior to its completion? This study offers a real options view on this decision by examining the contingent effects of portfolio configuration. We explore how project withdrawal can be influenced by two distinct dimensions of portfolio configuration, portfolio focus in a strategic domain and portfolio diversity across multiple domains. The empirical analysis shows that while portfolio focus weakens the negative effect of industry‐level uncertainty on a venture capitalist's propensity to withdraw from a project, portfolio diversity strengthens the effect of uncertainty. This study informs current research on the boundary of real options theory and sheds light on the behavior of venture capitalists in financing entrepreneurship. Copyright © 2013 John Wiley & Sons, Ltd.     

The importance of the first relationship: The ongoing influence of initial network on future status

The current view of network emergence is predominantly influenced by path‐dependent mechanisms where immediately preceding network structures inform current network positions. However, less explored is the ongoing sensitivity of future network positions to the composition and structure of newcomers' first partnerships. Building on the social categorization literature, we develop a model of the ongoing direct and moderating effects of newcomers' first network partnership on their status. We test our model using a panel of 272 U.S. venture capital firms from the 1980 to 2004 period and show that the reputation of newcomers' first partners exerts a positive influence on their future status (over and above intermediate network conditions). We find that this positive influence is stronger for those newcomers whose first partners formed a cohesive network. Copyright © 2013 John Wiley & Sons, Ltd.     

Niche and performance: the moderating role of network embeddedness

What is the relationship between niche and performance? We identify two types of niche positions—product niche and process niche—defined by the extent to which a firm offers distinctive products and has distinctive operational processes, respectively. We argue that the effect of each niche on firm performance is contingent upon network embeddedness—the extent to which a firm is involved in a network of interconnected inter‐firm relationships. Using data covering the period 1995–98 pertaining to venture capital firms and their holdings in initial public offerings (IPOs), we show that both product niche and process niche interact with network embeddedness to determine firm performance. Our findings suggest that the extent to which a firm offers distinctive products or processes will be more positively associated with firm performance when network embeddedness is high. Copyright © 2004 John Wiley & Sons, Ltd.     

Entrepreneurial beacons: The Yale endowment,run‐ups,and the growth of venture capital

Research summary : This article investigates the social context of entrepreneurship in organizational sectors. Prior research suggests that firm foundings are driven by collective patterns of activity—such as patterns of prior foundings in a given sector. Building on research on social salience and signals, we consider the influence of singular sector‐level triggers, which we call entrepreneurial beacons. We argue that the actions or outcomes of single, salient organizations attract and motivate entrepreneurs, thus increasing the rate of foundings. We test this logic by examining the impact of the Y ale U niversity endowment's investment choices and of venture‐capital‐backed IPO run‐ups on venture‐capital foundings between 1984 and 2011. We find support for the existence and influence of beacons and outline boundary conditions for their effects . Managerial summary : What leads entrepreneurs to found new companies in nascent sectors? In contrast to prior research, which emphasizes patterns of activity, we argue that entrepreneurial activity can sometimes be driven by the actions of a singular trigger—what we call an entrepreneurial beacon. We examine the influence of two such beacons, Y ale U niversity's endowment investments and exceptional venture‐capital‐backed IPO run‐ups, on the founding of new venture‐capital firms over a 28‐year period. We find that Y ale's increased allocations to the venture‐capital asset‐class has a significant influence on the founding of new venture‐capital firms, while exceptional venture‐capital‐backed IPO run‐ups only influence venture‐capital foundings under certain conditions. Overall, we offer an explanation for heretofore anecdotal accounts of certain organizations or events that appear to have an outsized influence on entrepreneurial activity . Copyright © 2016 John Wiley & Sons, Ltd.     

Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry

This study reveals the multifaceted contribution of alliance portfolios to firms' market performance. Extending prior research that has stressed the value‐creation effect of network resources, it uncovers how prominent partners may undermine a firm's capacity to appropriate value from its alliance portfolio. Analysis of a comprehensive panel dataset of 367 software firms and their 20,779 alliances suggests that the contribution of network resources to value creation varies with the complementarity of those resources. Furthermore, the relative bargaining power of partners in the alliance portfolio constrains the firm's appropriation capacity, especially when many of these partners compete in the focal firm's industry. In turn, the firm's market performance improves with the intensity of competition among partners in its alliance portfolio. These findings advance network research by highlighting the trade‐offs that alliance portfolios impose on firms that seek to manage and leverage their alliances. Copyright © 2007 John Wiley & Sons, Ltd.     

Governance,ownership structure,and performance of IPO firms: the impact of different types of private equity investors and institutional environments

This paper examines performance effects of ownership concentration and two types of private equity investors (venture capitalists and business angels) in firms that have recently undergone an initial public offering (IPO) in the United Kingdom and France. We expand and contextualize nascent understanding of multiple agency theory by examining heterogeneity of private equity investors and by suggesting that multiple agency relationships are affected by different institutional contexts. We employ a unique, hand‐collected dataset of 224 matched IPOs (112 in each country). Controlling for the endogeneity of private equity investors' retained share ownership, we find support for the agency theory argument that concentrated ownership improves IPOs' performance. The research also shows that the two types of private equity investors have a differential impact on performance, and the legal institutions in a given country moderate this impact. Copyright © 2009 John Wiley & Sons, Ltd.     

Small is big in ICT: The impact of R&D on productivity

We examine the contribution of R&D to firm productivity in a large panel of European firms and study its variation with the age, size, and sub-sector of firms. We find that R&D capital in ICT firms has a larger effect on revenue when compared to non-ICT firms. At the firm level, our results suggest that, surprisingly, smaller and older ICT firms benefit the most from R&D. Small but mature ICT firms are likely to dominate market niches, and small size may enable them to be flexible and adaptable which helps them respond to technological opportunities to develop innovative products and services. This has important implications for public policy based upon firm age.     

Calls on high-technology: Japanese exploration of venture capital investments in the United States

The strategic logic of Japanese high-technology venture capital investment reveals the existence of an implicit call option, or ‘shadow option’, on new technology. This option is exercised by further investment in product development, manufacturing and distribution. The process is described with reference to a comparative study of Japanese and U.S. venture capital firms. Similarities and differences between the two groups are reported, and a conceptual model of Japanese option strategy is formulated. The implications for our understanding of Japanese strategy and for strategic management theory are discussed.     

The contingent effects of top management teams on venture performance: Aligning founding team composition with innovation strategy and commercialization environment

How does the relationship between founding team composition and venture performance depend on the venture's strategy and business environment? Using data from a novel survey of 2,067 firms, we show that while diverse founding teams tend to exhibit higher performance, this is not universally true. We find that founding teams that are diverse are likely to achieve high performance in a competitive commercialization environment. On the other hand, technically focused founding teams are aligned with a cooperative commercialization environment and when the enterprise pursues an innovation strategy. These results are robust to corrections for endogenous team formation concerns. The findings suggest that ventures cannot ignore founding team composition and expect to later professionalize their top management teams to align with their strategy and environment. Copyright © 2013 John Wiley & Sons, Ltd.     

Ties' repeatedness,partners' social value,and alliance portfolio performance in emerging economy: The moderating roles of firm-government linkages

Repeatedly collaborating with previous partners or following peers' decisions are two primary strategies employed by emerging economy firms in selecting their alliance partners. As a result, the alliance portfolios of firms often feature a high level of ties' repeatedness and partners' social value—the extensiveness of a firm's partners being selected by other players in the industry. However, few studies examine whether these two features can result in superior alliance portfolio performance. Leveraging data collected from 566 fund product distribution alliances initiated by 62 fund companies in a 5-year period (2007–2011), we find that ties' repeatedness does not significantly improve alliance portfolio performance. In fact, a high level of social value of the current partners produces a negative effect. However, firms' linkages to governments can change the performance consequences of these two features. As a category of formal government–firm linkages, state ownership improves the positive effect of ties' repeatedness on alliance portfolio performance, while it strengthens the negative effect of partners' social value. As a category of informal linkages, political ties weaken the positive effect of ties' repeatedness on alliance portfolio performance but cannot significantly alleviate the negative effect of the social value of current partners.     

Learning to let go: Social influence,learning, and the abandonment of corporate venture capital practices

Research summary: This study examines the abandonment of organizational practices. We argue that firm choices in implementing practices affect how firms experience a practice and their subsequent likelihood of abandonment. We focus on utilization of the practice and staffing (i.e. career backgrounds of managers), as two important implementation choices that firms make. The findings demonstrate that practice utilization and staffing choices not only affect abandonment likelihood directly but also condition firms' susceptibility to pressures to abandon when social referents do. Our study contributes to diffusion research by examining practice abandonment—a relatively unexplored area in diffusion research—and by incorporating specific aspects of firms' post‐adoption choices into diffusion theory. Managerial summary: When do firms shut down practices? Prior research has shown that firms learn from the actions of other firms, both adopting and abandoning practices when their peers do. But unlike adoption decisions, abandonment decisions need to account for firms' own experiences with the practice. We study the abandonment of corporate venture capital (CVC) practices in the U.S. IT industry, which has experienced waves of adoption and abandonment. We find that firms that make more CVC investments are less likely to abandon the practice, and are less likely to learn vicariously from other firms' abandonment decisions, such that they are less likely to exit CVC when other firms do. Staffing choices also matter: hiring former venture capitalists makes firms less likely to abandon CVC practices, while hiring internally makes abandonment more likely. Plus, staffing choices affect how firms learn from the environment, as CVC managers pay attention to and learn more from the actions of firms that match their work backgrounds; i.e., firms that staff CVC units with former venture capitalists are more likely to follow exit decisions of VC firms, while those that staff with internal hires are more likely to follow their industry peers. Our results suggest that firms wanting to retain CVC practices should think carefully about the implementation choices they make, as they may be inadvertently sowing seeds of abandonment. Copyright © 2015 John Wiley & Sons, Ltd.     

A note on the dynamics of learning alliances: competition,cooperation, and relative scope

Khanna, Gulati, and Nohria (1998) examine the dynamics of alliance learning and develop a conceptual framework designed to capture the tension between cooperation and competition. Based on the concepts of private and common benefits and relative scope, the authors explore firms' learning behavior patterns. This note comments on the framework and suggests that although the framework introduces some interesting concepts, the reliance on simple models from economic theory leaves the framework somewhat disconnected from the process of alliance management. Copyright © 2000 John Wiley & Sons, Ltd.     

实物期权定量分析方法在风险投资决策中的应用

在风险投资项目中，不确定性对风险项目投资评价、决策起到了决定性的作用。运用实物期权原理分析了不确定性对风险投资项目评价和决策的影响，通过风险中性概率方法将这些影响予以定量化，并进一步对实际投资行为作出解释。     

The role of managers' political networking and functional experience in new venture performance: Evidence from China's transition economy

Drawing upon the resource‐based view and transaction cost economics, this study aims to examine how various types of managerial resources (i.e., political networking and functional experience) can be beneficial to new ventures in a transition economy. Using survey data from a sample of new ventures in China's high‐technology industries, we demonstrate that managers' political networking and functional experience are positively related to new venture performance. We also find that the positive relationship between functional experience and new venture performance is moderated by the type of ownership of the ventures and the level of dysfunctional competition in their environments. Theoretical and managerial implications are discussed. Copyright © 2007 John Wiley & Sons, Ltd.     

Heterogeneity in turnover: The effect of relative compensation dispersion of firms on the mobility and entrepreneurship of extreme performers

We explore the strategic implications of firm compensation dispersion on the heterogeneous turnover outcomes of employee mobility and entrepreneurship. We theorize that individuals' turnover decisions are affected by the interaction of individual performance with the firm's compensation dispersion relative to its competitors. We test our theory using linked employer-employee data from the legal services industry. We find that individuals with extreme high performance are less likely to leave firms that offer higher compensation dispersion than competitors, however, if they do leave these employers, they are more likely to create new ventures. In contrast, employees with extreme low performance are more likely to leave firms with more compensation dispersion than competitors, and these individuals are less likely to engage in new venture creation. Copyright © 2012 John Wiley & Sons, Ltd.     

Form or substance: the role of business plans in venture capital decision making

We explore a well‐known instance of fast decision making under high uncertainty, venture capital (VC) opportunity screening. We analyze a sample of 722 funding requests submitted to an American VC firm and evaluate the influence of the form of the submission and content of business planning documents on VC funding decisions. We improve on prior literature by a) using a large sample of known representativeness, b) relating request characteristics to actual VC decisions, and c) developing an inferential logic that takes account of the multiple sources of information to which VCs have access. We find that the presence of planning documents and some information contained therein are weakly associated with VC funding decisions. Based on our inferential strategy, we find that this information is learned independently of its inclusion in the business planning documents. Copyright © 2009 John Wiley & Sons, Ltd.