Research Summary: This study draws on the performance feedback theory to advance a behavioral perspective on the dynamics of cooperation among competitors in venture capital (VC) syndicates. Analyzing VC syndicates over a 33‐year period, I find that firms’ performance relative to historical and social aspirations acts as a switch in firms’ behavior with respect to dual goals of cooperation and competition in syndicates with competitors. Competition among firms in a syndicate negatively affects the probability of an IPO, but syndicates composed of firms underperforming their aspirations have a better chance of an IPO than syndicates of firms outperforming their aspirations, ceteris paribus. This effect is stronger when firms’ goals in a syndicate are symmetrical or when firms’ motivations based on both historical and social aspirations are aligned.
Managerial Summary: Competition among VC syndicate members negatively affects a syndicate’s prospects of achieving an IPO because syndicate members hold back resources for fear of their appropriation by competing partners. However, firms underperforming their track record or peer firms shift their priorities toward syndicate success and allocate more resources to their syndicates, thereby reducing the negative effect of competition. These results suggest that start‐up companies seeking VC investors, VC firms seeking co‐investors, and limited partners providing funds to VC firms all need to look beyond the capabilities of VC firms in a syndicate or their complementarity and also consider firms’ relative performance. VC syndicates comprised of firms striving to correct temporary underperformance are likely to show superior results due to those firms’ added motivation.
We examine the effect of status entrenchment on the adoption of new norm-deviant organizational practices. Identifying organizational age and status mobility as factors affecting entrenchment, we extend the middle-status conformity theory by explicating how entrenchment moderates the relationship between status and adoption. Using original data from the Japanese loan syndication market, we show that young and new-in-status banks have a lower propensity to follow status-based adoption behavior than actors entrenched in the same status positions. We discuss implication of these results for the understanding of new practice adoption and organizational status effects.
In this paper, we develop a new perspective on what determines firms’ choice of new markets for entry. First, drawing on the open‐system theoretical tradition and literature on inter‐organizational networks, we advance and empirically test the proposition that firms tend to enter new markets to which they are connected by partnership ties. We then show that this network influence is filtered through the structure of firms’ network connections to new markets and firms’ experience. Specifically, we find that multiplicity of connections to new markets, as well as the extensiveness of firms’ experience and its relevance to new markets weaken the effect of network ties on firms’ choice of new markets. The results of this study indicate that firms’ choice of new markets for entry is a nuanced process that is affected by the interplay of firms’ collaborative ties, the structure of their network, and firms’ internal capabilities. We test our hypotheses in the empirical context of the U.S. venture capital (VC) industry using panel data over a 23‐year period and find broad support for them.
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