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The Association between Venture Capitalists’ Selection and Value Adding Behavior: Evidence from Early Stage High Tech Venture Capitalists

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  • M. KNOCKAERT

    ()

  • T. VANACKER

    ()

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    Abstract

    Building upon self-efficacy and collective effort theories, we study the association between the selection behavior of venture capitalists and their involvement in value adding activities. We argue that investors, who prioritize different characteristics of a business proposal during selection, will be more or less confident of their own abilities and the abilities of entrepreneurial teams to effectively add value to portfolio companies and hence will be more or less involved in providing value adding activities. In order to test this claim, we use a stratified sample comprising 68 European early stage high tech venture capitalists. Results show that venture capitalists, who focus on entrepreneurial team characteristics or financial criteria during selection are less involved in value adding activities compared to their peers, who focus on technological criteria. We discuss these findings from a theoretical and practical perspective.

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    Bibliographic Info

    Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 11/741.

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    Length: 44 pages
    Date of creation: Sep 2011
    Date of revision:
    Handle: RePEc:rug:rugwps:11/741

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    Keywords: venture capital; value adding behavior; selection behavior; self-efficacy theory; collective effort theory;

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