Three Studies on the Role of Venture Capital Firms in Funded Ventures’ Inter-Firm Collaboration

Date

2011-08

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Abstract

Despite the beneficial effects of alliances in facilitating survival, growth and performance of entrepreneurial startups, it is in general difficult for entrepreneurial startups to form alliances due to their poor resource endowments and lack of established social networks. Venture capital firms are active investors that support the development of entrepreneurial startups by providing both funding and a variety of non-pecuniary value-added services. In this dissertation, I examine the influence of VC firms on alliance formation by entrepreneurial startups in their investment portfolios (portfolio firms), which is a unique value-added service of VC firms that has been largely ignored in extant literature.

In this three-paper dissertation, I posit that VC firms can influence portfolio firms’ alliance formation by providing reliable information about potential alliance opportunities. I investigate, respectively in three papers, the relationship between alliance formation by a portfolio firm and 1) composition of VC syndication, 2) alliance formation by firms in the same VC portfolio, and 3) network positions of VC firms. Specifically, in study one I argue that VC syndications with different compositional characteristics, such as size, experience and heterogeneity, offer different levels of information benefits for portfolio firms with respect to alliance opportunities, which influence the likelihood of alliance formation by portfolio firms. Strength of the relationship between VC firms and their portfolio firms is found to positively moderate the relationship between VC syndication composition and the alliance formation by portfolio firms. In study two, I examine the influence of VC interlocks on alliance formation by portfolio firms, as well as the cross-level moderating effects of tie strength and TMT size. In study three I propose that VC firms’ positions in their syndication networks – network centrality and network constraint – are positively associated with alliance formation by portfolio firms, and such relationship is weaker when the VC firms are corporate subsidiaries.

To test the hypotheses of these three papers of the dissertation, I assembled three distinct data sets from multiple archival data sources. Conditional logit regression, longitudinal multilevel logit regression, and logit regression were employed respectively. These studies contribute to the strategy and entrepreneurship literatures in general and the alliance and VC literatures in particular.

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Keywords

Alliance, Venture capital, Entrepreneurial startups

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