The Nature of Information and Overconfidence on Venture Capitalists’ Decision Making

Zacharakis, Andrew; Shepherd, Dean A.

doi:10.4337/9781784716042.00032

Cited by 164 publications

(261 citation statements)

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“…Second, investment managers suffer from overconfidence. As Zacharakis and Shepherd (2001) point out, more information should enable the VCs to assess any potential pitfalls, however, it also makes the decision more complex. Thus, more information creates greater confidence, but it also leads to lower decision accuracy.…”

Section: Stage 2: Model Testingmentioning

confidence: 99%

Are technology VC investors a distinct species on the investment market?

2010

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Section: Stage 2: Model Testingmentioning

confidence: 99%

Are technology VC investors a distinct species on the investment market?

2010

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“…For example, more than 90% of the venture capitalists surveyed by Zacharakis and Shepherd (2001) and Hayward, Shepherd, and Griffin (2006) exhibit significant overconfidence. The best entrepreneurs embrace uncertainties, yet protect themselves against excessive downside risk.…”

Section: Competing On Knowledge Executionmentioning

confidence: 99%

Entrepreneurs as intermediaries

Peng

Lee

Hong

2014

Journal of World Business

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[Acknowledgment] We thank John Slocum (editor) and two reviewers for their guidance, and Dane Blevins, Omer Gokalp, Sergey Lebedev, Craig Macaulay, Canan Mutlu, Steve Sauerwald, Ciprian Stan, Weichieh Su for their helpful comments. This research was supported in part by a National Science Foundation CAREER Grant (SES 0238820) and the Jindal Chair at UT Dallas. The views are ours and not necessarily those of the underwriters. 2 Entrepreneurs as Intermediaries [Abstract]This paper sketches the contours of a theory of entrepreneurship focusing on the nature of entrepreneurship as intermediation under information asymmetries. While entrepreneurship, strategy, and finance researchers have studied the relationship between entrepreneurs and intermediaries, they tend to treat intermediaries, such as venture capitalists, as a separate organizational form that is parallel with (start-up) entrepreneurs. In this paper, we consider entrepreneurs as intermediaries who discover, create, and exploit entrepreneurial opportunities by bearing uncertainties stemming from intermediation between potential buyers and sellers under information asymmetries. Specifically, we focus on two key questions in entrepreneurship research: (1) Why do entrepreneurs arise and exist at all? (2) Why do some entrepreneurs perform better than others in creating entrepreneurial opportunities, and ultimately creating wealth? Our discussion culminates in a new research agenda with four testable propositions.3

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“…SROI) (Maree and Mertens, 2012;Saltuk et al, 2011). However, it is also indicative of the 'information asymmetry' prevalent within the social investment market as the lack of credible indicators of social performance, as in any market, forces investors to make intuitive, subjective and individual appraisals of investment opportunities (Jankowicz and Hisrich, 1987;Zacharakis and Shepherd, 2001). …”

Section: "I Think the Main Barrier Is That A Lot Of Voluntary Socialmentioning

confidence: 99%

“…Bank loan officers were shown to make subjective evaluations around a potential investee's character, with favourable characteristics viewed as conformity, low risk-taking propensity and professionalism (Wilson et al, 2007). This has also been evidenced as taking place in the equity investment sector, with the evaluation of 'soft data' and the use of intuition forming an integral part of the venture capitalist investor's due-diligence process (Zacharakis and Shepherd, 2001). Often intuitive decision-making processes are a symbol of a lack of clear information in a market, as investors have to rely on their 'gut reaction' (Jankowicz and Hisrich, 1987), particularly when funding start-up or early-phase businesses (Ramón et al, 2007;Ferrary, 2010).…”

Section: Investment Readinessmentioning

confidence: 99%