The Effects of Intra‐industry and Extra‐industry Networks on Performance: A Case of Venture Capital Portfolio Firms

Abstract

Citation: Bellavitis, C., Filatotchev, I. and Kamuriwo, D. S. (2014). The effects of intraindustry and extra-industry networks on performance: A case of venture capital portfolio firms. Managerial and Decision Economics, 35(2), pp. 129-144. doi: 10.1002/mde.2647 This is the accepted version of the paper.This version of the publication may differ from the final published version. However, interaction effects show that once a firm establishes a sufficient number of extra-industry ties, it is able to profit from the network in its industry of operation. PermanentOverall, these findings show that an optimal balance of ties is achieved through a diverse set of connections incorporating both intra-and extra-industry ties.

Mitigating agency risk between investors and ventures’ managers

“…Despite the dataset's advantages discussed in the main text, it may raise concerns of generalizability, which can be addressed by comparing the sample with those used in similar studies. In relation to the ventures' development, this sample is similar to Podolny (2001) and Bellavitis, Filatotchev and Kamuriwo (2014 The degree of syndication is also aligned with other studies. Sorenson and Stuart (2001) find that the average syndicate is composed of 3.5 investors, while Bellavitis et al (2014) report 3.1 for the average syndicate.…”

The Impact of Investment Networks on Venture Capital Firm Performance: A Contingency Framework

“…The number of exits is a clear and objective way to assess VC performance (Cumming, 2007), and IPOs and trade sales are widely regarded as the best exit outcomes for VCs (Gompers and Lerner, 1999). Alternative measures of success, such as accounting measures, may be misleading in this industry and are seldom available; both the portfolio companies and the VCs are private companies that rarely disclose their financial results (Bellavitis et al, 2014). Therefore, in order to test our hypotheses, we used the number of exits (trade sales and IPOs) in a given year as a proxy of VC performance 9 .…”

“…Hochberg et al, 2007). We choose to focus on the UK VC market because, although being the most important VC market in Europe (EVCA, report on European VC activity 2012) and the third most attractive worldwide (IESE, 2013), it has received considerably less attention than the US VC market (Bellavitis, Filatotchev, and Kamuriwo, 2014).…”

Market Orientation, Growth Strategy, and Firm Performance: The Moderating Effects of External Connections

“…For many entrepreneurs, obtaining VC funding was already a significant achievement, a stamp of quality and success. VCs were considered a valuable sign of legitimacy (Stuart, Hoang and Hybels, 1999) and an important source of advice and contacts (Bellavitis, Filatotchev and Kamuriwo, 2014;Cumming, Fleming and Suchard, 2005;Sapienza, Manigart and Vermeir, 1996). VC funding and connections fuel strong growth domestically and internationally.…”