Publication Type

Journal Article

Version

publishedVersion

Publication Date

4-2021

Abstract

In this study, we investigate the emergence of status-asymmetric ties among venture capital firms. In particular, we highlight the venture's performance trajectory as a powerful antecedent of upward-status asymmetries (in which a lower-status actor brings a higher-status alter into a venture) as well as downward-status asymmetries (in which a higher-status actor brings in a lower-status alter). We hypothesize that lower-status firms tend to bring higher-status alters into ventures on a better performance trajectory, whereas higher-status firms tend to bring lower-status alters into poorly performing ventures. Furthermore, we argue that these effects will be moderated by market heat, which affects whether investors would focus on the upside or downside of deals. We test our hypotheses in a longitudinal analysis of venture capital syndication patterns in the United States between 1990 and 2017. We find support for most of our predictions and document that the ability of lower-status lead investors to bring higher-status followers into good ventures is particularly accentuated in hot markets, which can heighten market participants' concerns about missing good deals. We thus highlight the interplay between the internal and the external contexts in shaping the formation of status-asymmetric relationships.

Keywords

Venture capital firms, investment, status-asymmetric relationships

Discipline

Finance and Financial Management | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

Academy of Management Journal

Volume

64

Issue

2

First Page

509

Last Page

536

ISSN

0001-4273

Identifier

10.5465/amj.2018.0969

Publisher

Academy of Management

Copyright Owner and License

Publisher

Additional URL

https://doi.org/10.5465/AMJ.2018.0969

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