IDEAS home Printed from https://ideas.repec.org/a/sae/entthe/v46y2022i5p1344-1373.html

How Starting Strategy and Network Structure Shape Problemistic Search: An Examination of Venture Capital Firms

Author

Listed:
  • Jake Duke
  • Taha Havakhor
  • Rachel Mui
  • Owen Parker

Abstract

Building on the behavioral theory of the firm, we empirically examine how starting strategies and syndication networks can influence venture capital (VC) firms’ problemistic search. We propose that: (a) depending on a VC’s strategic starting point, that is, the VC’s extent of specialization, the directionality of problemistic search may change to either expanding or contracting search activities; and (b) depending on search direction, structural holes in syndication networks can either impede or facilitate the problemistic search process. In a sample of U.S. VC firms, we find results consistent with our predictions, which have important implications for entrepreneurship and organizational strategy research.

Suggested Citation

  • Jake Duke & Taha Havakhor & Rachel Mui & Owen Parker, 2022. "How Starting Strategy and Network Structure Shape Problemistic Search: An Examination of Venture Capital Firms," Entrepreneurship Theory and Practice, , vol. 46(5), pages 1344-1373, September.
    • Handle: RePEc:sae:entthe:v:46:y:2022:i:5:p:1344-1373
    DOI: 10.1177/10422587211033574
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/10422587211033574
    Download Restriction: no
    File URL: https://libkey.io/10.1177/10422587211033574?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yi Yang & Vadake K. Narayanan & Donna M. De Carolis, 2014. "The relationship between portfolio diversification and firm value: The evidence from corporate venture capital activity," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 1993-2011, December.
    2. Paul R. Steffens & Clinton S. Weeks & Per Davidsson & Lauren Isaak, 2014. "Shouting from the Ivory Tower: A Marketing Approach to Improve Communication of Academic Research to Entrepreneurs," Entrepreneurship Theory and Practice, , vol. 38(2), pages 399-426, March.
    3. Harry J. Sapienza & Allen C. Amason, 1993. "Effects of Innovativeness and Venture Stage on Venture Capitalist-Entrepreneur Relations," Interfaces, INFORMS, vol. 23(6), pages 38-51, December.
    4. Paul Gompers & Anna Kovner & Josh Lerner, 2009. "Specialization and Success: Evidence from Venture Capital," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(3), pages 817-844, September.
    5. Wei‐Ru Chen & Kent D. Miller, 2007. "Situational and institutional determinants of firms' R&D search intensity," Strategic Management Journal, Wiley Blackwell, vol. 28(4), pages 369-381, April.
    6. Sinan Aral & Erik Brynjolfsson & Lynn Wu, 2012. "Three-Way Complementarities: Performance Pay, Human Resource Analytics, and Information Technology," Management Science, INFORMS, vol. 58(5), pages 913-931, May.
    7. Buchner, Axel & Mohamed, Abdulkadir & Schwienbacher, Armin, 2017. "Diversification, risk, and returns in venture capital," Journal of Business Venturing, Elsevier, vol. 32(5), pages 519-535.
    8. James A. Brander & Raphael Amit & Werner Antweiler, 2002. "Venture‐Capital Syndication: Improved Venture Selection vs. The Value‐Added Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 423-452, September.
    9. Pasi Kuusela & Thomas Keil & Markku Maula, 2017. "Driven by aspirations, but in what direction? Performance shortfalls, slack resources, and resource-consuming vs. resource-freeing organizational change," Strategic Management Journal, Wiley Blackwell, vol. 38(5), pages 1101-1120, May.
    10. Sharon F. Matusik & Markus A. Fitza, 2012. "Diversification in the venture capital industry: leveraging knowledge under uncertainty," Strategic Management Journal, Wiley Blackwell, vol. 33(4), pages 407-426, April.
    11. Makarevich, Alex, 2018. "Ties of survival: Specialization, inter-firm ties, and firm failure in the U.S. venture capital industry," Journal of Business Research, Elsevier, vol. 86(C), pages 153-165.
    12. Tom Vanacker & Daniel P. Forbes, 2016. "Disentangling the Multiple Effects of Affiliate Reputation on Resource Attraction in New Firms," Organization Science, INFORMS, vol. 27(6), pages 1525-1547, December.
    13. Norton, Edgar & Tenenbaum, Bernard H., 1993. "Specialization versus diversification as a venture capital investment strategy," Journal of Business Venturing, Elsevier, vol. 8(5), pages 431-442, September.
    14. repec:bla:jfinan:v:59:y:2004:i:4:p:1805-1844 is not listed on IDEAS
    15. Norris Krueger, 1993. "The Impact of Prior Entrepreneurial Exposure on Perceptions of New Venture Feasibility and Desirability," Entrepreneurship Theory and Practice, , vol. 18(1), pages 5-21, October.
    16. Bat Batjargal & Michael Hitt & Anne Tsui & Jean-Luc Arregle & Justin Webb & Toyah Miller, 2013. "Institutional Polycentrism, Entrepreneurs' Social Networks, and New Venture Growth," Post-Print hal-02276709, HAL.
    17. Vibha Gaba & John Joseph, 2013. "Corporate Structure and Performance Feedback: Aspirations and Adaptation in M-Form Firms," Organization Science, INFORMS, vol. 24(4), pages 1102-1119, August.
    18. Ryan W. Angus, 2019. "Problemistic search distance and entrepreneurial performance," Strategic Management Journal, Wiley Blackwell, vol. 40(12), pages 2011-2023, December.
    19. Baum, Joel A. C. & Silverman, Brian S., 2004. "Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups," Journal of Business Venturing, Elsevier, vol. 19(3), pages 411-436, May.
    20. Douglas Cumming & Grant Fleming & Armin Schwienbacher, 2009. "Style Drift in Private Equity," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 645-678, June.
    21. Markus Fitza & Sharon F. Matusik & Elaine Mosakowski, 2009. "Do VCs matter? the importance of owners on performance variance in start‐up firms," Strategic Management Journal, Wiley Blackwell, vol. 30(4), pages 387-404, April.
    22. Bat Batjargal, 2013. "Institutional Polycentrism, Entrepreneurs??? Social Networks, And New Venture Growth," William Davidson Institute Working Papers Series wp1060, William Davidson Institute at the University of Michigan.
    23. Mark Washburn & Philip Bromiley, 2012. "Comparing Aspiration Models: The Role of Selective Attention," Journal of Management Studies, Wiley Blackwell, vol. 49(5), pages 896-917, July.
    24. Varkey Titus Jr. & Owen Parker & Jeffrey Covin, 2020. "Organizational Aspirations and External Venturing: The Contingency of Entrepreneurial Orientation," Entrepreneurship Theory and Practice, , vol. 44(4), pages 645-670, July.
    25. Anoop R. Menon & Dennis A. Yao, 2017. "Elevating Repositioning Costs: Strategy Dynamics and Competitive Interactions," Strategic Management Journal, Wiley Blackwell, vol. 38(10), pages 1953-1963, October.
    26. Edward J. Zajac & Stephen M. Shortell, 1989. "Changing generic strategies: Likelihood, direction, and performance implications," Strategic Management Journal, Wiley Blackwell, vol. 10(5), pages 413-430, September.
    27. Yael V. Hochberg & Alexander Ljungqvist & Yang Lu, 2007. "Whom You Know Matters: Venture Capital Networks and Investment Performance," Journal of Finance, American Finance Association, vol. 62(1), pages 251-301, February.
    28. Dirk De Clercq & Dimo Dimov, 2008. "Internal Knowledge Development and External Knowledge Access in Venture Capital Investment Performance," Journal of Management Studies, Wiley Blackwell, vol. 45(3), pages 585-612, May.
    29. Gompers, Paul A, 1995. "Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-1489, December.
    30. repec:hal:journl:hal-02313079 is not listed on IDEAS
    31. Pino G. Audia & Henrich R. Greve, 2006. "Less Likely to Fail: Low Performance, Firm Size, and Factory Expansion in the Shipbuilding Industry," Management Science, INFORMS, vol. 52(1), pages 83-94, January.
    32. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
    33. Glasmeier, Amy, 1991. "Technological discontinuities and flexible production networks: The case of Switzerland and the world watch industry," Research Policy, Elsevier, vol. 20(5), pages 469-485, October.
    34. Elio Shijaku & Martin Larraza-Kintana & Ainhoa Urtasun-Alonso, 2020. "Network centrality and organizational aspirations: A behavioral interaction in the context of international strategic alliances," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(5), pages 813-828, July.
    35. Leslie E. Palich & Laura B. Cardinal & C. Chet Miller, 2000. "Curvilinearity in the diversification–performance linkage: an examination of over three decades of research," Strategic Management Journal, Wiley Blackwell, vol. 21(2), pages 155-174, February.
    36. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    37. Sophie Manigart & Andy Lockett & Miguel Meuleman & Mike Wright & Hans Landström & Hans Bruining & Philippe Desbrières & Ulrich Hommel, 2006. "Venture Capitalists’ Decision to Syndicate," Entrepreneurship Theory and Practice, , vol. 30(2), pages 131-153, March.
    38. Douglas Cumming & Grant Fleming & Armin Schwienbacher, 2009. "Style Drift in Private Equity," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 645-678, June.
    39. Bygrave, William D., 1987. "Syndicated investments by venture capital firms: A networking perspective," Journal of Business Venturing, Elsevier, vol. 2(2), pages 139-154.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xingwu Luo & Wei Qian & Min Liu & Xiaodan Yu & Yang Liu, 2024. "Towards sustainability: Digital capability, sustainable business model innovation, and corporate environmental responsibility of high‐performing enterprises in an emerging market," Business Strategy and the Environment, Wiley Blackwell, vol. 33(6), pages 5606-5623, September.
    2. Hess, Manuel & Reuther, Jana & Grichnik, Dietmar & Wincent, Joakim, 2025. "Corporate venture capital and strategic search: Performance spillovers in parent companies from sticking to the core business," Journal of Business Research, Elsevier, vol. 200(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohammadi, Ali & Shafizadeh, Mohammadmehdi & Johan, Sofia, 2014. "A Signaling Theory Of Entrepreneurial Venture’S Valuation: Evidence From Early Termination Of Venture Capital Investment," Working Paper Series in Economics and Institutions of Innovation 349, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    2. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 573-648, Elsevier.
    3. Wang, Pengfei, 2020. "Broadening versus reinforcing investor portfolios: Social structure and the search for venture capital investors," Journal of Business Venturing, Elsevier, vol. 35(1).
    4. Antretter, Torben & Sirén, Charlotta & Grichnik, Dietmar & Wincent, Joakim, 2020. "Should business angels diversify their investment portfolios to achieve higher performance? The role of knowledge access through co-investment networks," Journal of Business Venturing, Elsevier, vol. 35(5).
    5. Cheng, Chun-Yun & Tang, Ming-Je, 2019. "Partner-selection effects on venture capital investment performance with uncertainties," Journal of Business Research, Elsevier, vol. 95(C), pages 242-252.
    6. Xiao Hu & Jiayi Wang & Banggang Wu & Taiyang Zhao, 2022. "Specialist or new entrant: Who is the ideal investor for a new venture?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2055-2065, September.
    7. Li, Yong & Vertinsky, Ilan B. & Li, Jing, 2014. "National distances, international experience, and venture capital investment performance," Journal of Business Venturing, Elsevier, vol. 29(4), pages 471-489.
    8. Annalisa Croce & Elisa Ughetto, 2019. "The role of venture quality and investor reputation in the switching phenomenon to different types of venture capitalists," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(2), pages 191-227, June.
    9. Zhang, Jing & Zhang, Wei & Schwab, Andreas, 2024. "Interorganizational triads for foreign-market entry: Partnerships among Western, bridge-economy, and local VCs in Mainland China," Journal of Business Venturing, Elsevier, vol. 39(1).
    10. Achleitner, Ann-Kristin & Engel, Nico & Reiner, Uwe, 2013. "The performance of venture capital investments: Do investors overreact?," Review of Financial Economics, Elsevier, vol. 22(1), pages 20-35.
    11. Thomas Keil & Markku V.J. Maula & Cameron Wilson, 2010. "Unique Resources of Corporate Venture Capitalists as a Key to Entry into Rigid Venture Capital Syndication Networks," Entrepreneurship Theory and Practice, , vol. 34(1), pages 83-103, January.
    12. Hana Milanov & Dean A. Shepherd, 2013. "The importance of the first relationship: The ongoing influence of initial network on future status," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 727-750, June.
    13. Elizabeth Lim & Pino G. Audia, 2020. "Problem-Solving or Self-Enhancing? Influences of Diversification and Bright Spot on Corporate Resource Allocation Responses to Performance Shortfalls," Strategy Science, INFORMS, vol. 5(4), pages 348-368, December.
    14. Guerini, Massimiliano & Quas, Anita, 2016. "Governmental venture capital in Europe: Screening and certification," Journal of Business Venturing, Elsevier, vol. 31(2), pages 175-195.
    15. Ann‐Kristin Achleitner & Nico Engel & Uwe Reiner, 2013. "The performance of venture capital investments: Do investors overreact?," Review of Financial Economics, John Wiley & Sons, vol. 22(1), pages 20-35, January.
    16. Lohwasser, Todor S., 2020. "Meta-analyzing the relative performance of venture capital-backed firms," Discussion Papers of the Institute for Organisational Economics 4/2020, University of Münster, Institute for Organisational Economics.
    17. Chia-Ling Chang & Yen-Sheng Lee & Han-Kun Tien, 2021. "Does Venture Capital Affect Crowdfunding Performance?," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 19(2), pages 53-64, November.
    18. Jade Y. Lo & Lei Xu & Haemin Dennis Park, 2024. "Hot Markets, Sociocognitive Cues, and New Market Entry in the U.S. Venture Capital Industry," Entrepreneurship Theory and Practice, , vol. 48(2), pages 478-505, March.
    19. Johannes Wallmeroth & Peter Wirtz & Alexander Peter Groh, 2017. "Institutional Seed Financing, Angel Financing, and Crowdfunding of Entrepreneurial Ventures: A Literature Review," Working Papers hal-01527999, HAL.
    20. Yannis Pierrakis & George Saridakis, 2019. "The role of venture capitalists in the regional innovation ecosystem: a comparison of networking patterns between private and publicly backed venture capital funds," The Journal of Technology Transfer, Springer, vol. 44(3), pages 850-873, June.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:entthe:v:46:y:2022:i:5:p:1344-1373. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.