Do VCs matter? the importance of owners on performance variance in start‐up firms

By Markus Fitza, Sharon F. Matusik, Elaine Mosakowski. 2009

180 citations recorded by the source corpus.

Adding to the corporate effect literature, we study the effect of owners on firm performance in a new context, that of venture capital firms (VCs) and the start-up firms in which they invest. After discussing the effect that VC ownership can have on start-ups, we estimate that start-up-specific, owner (VC), and year effects account for significant variance in performance (26.3 percent, 11.2 percent and 3.7 percent, respectively). The effects of industry and investment stage are not statistically different from zero. We also provide an analysis that separates the owner effect into two components: a selection component—which impacts investment—and a management component—which explains significant variance in performance. By examining the owner effect in a different institutionalized form of governance—that of the start-up and its relationship to VC owners—our study also contributes to an understanding of the ‘ownership’ effect in the strategy literature more generally. Copyright © 2008 John Wiley & Sons, Ltd.

Subfields: Accounting, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/43081ddd32f5e52c4fc5927201e9cba69a3ce8c7

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In Accounting

In Management of Technology and Innovation

Citations in the corpus

The Resource-Based View, Resourcefulness, and Resource Management in Startup Firms: A Proposed Research Agenda (2021, background): “These variations can influence their monitoring of entrepreneurs as they use resources to pursue their goals (Fitza et al., 2009).”
A Review and Road Map of Entrepreneurial Equity Financing Research: Venture Capital, Corporate Venture Capital, Angel Investment, Crowdfunding, and Accelerators (2017, background): “While several studies have used this context to reevaluate the corporate effects (e.g., Fitza et al., 2009) and diversification (Matusik & Fitza, 2012) literature and findings, many opportunities remain for using this context better to refine strategy theory.”
Social capital of venture capitalists and start-up funding (2012, background): “In doing so, we address Fitza et al. (2009)’s observation that the question of how exactly VCs’ social capital affects the funding of new ventures still lacks systematic research.”
The contingent value of venture capitalist reputation (2011, background): “Surprisingly little research has explored the issue of the timing of VC involvement in general (for exceptions, see Fitza et al., 2009; Kortum and Lerner, 2000; Sapienza, 1992), and no research we are aware of has considered the timing of investment with respect to VC reputation.”
The Role of Accelerator Designs in Mitigating Bounded Rationality in New Ventures (2018, unknown): “Like the research on incubators, this research indicates that such advising ultimately aids ventures’ development, but that venture capitalists vary substantially in their ability to improve ventures’ outcomes (Sørensen, 2007; Fitza, Matusik, and Mosakowski, 2009).”