Venture Capitalists’ Decision-Making in Hot and Cold Markets: The Effect of Signals and Cheap Talk
Simon Kleinert,
Marie Hildebrand
Abstract:This study examines the influence of market conditions—hot versus cold—on the decision-making processes of venture capitalists (VCs). Prior research suggests that VCs prefer costly signals over cheap talk when assessing new ventures under static conditions. However, based on a cognitive perspective, we argue that the dynamic nature of market conditions alters VCs’ information processing. In cold markets, VCs prioritize signals, whereas, in hot markets, they emphasize less costly cues that resonate with prevail… Show more
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