Entrepreneurship and organizational design: investor specialization

Abstract

PurposeThis paper seeks to investigate the impact of venture capital firm organization (VC) on operations at portfolio companies, emphasizing particularly value added and involvement.Design/methodology/approachPrior literature indicates the importance of organizational design on the VC firm's engagement and monitoring practices. A survey methodology is used to examine such relationships, including the significance of human capital for the process of investor engagement.FindingsThe paper finds that VC organizations with a market focus and deal specialization are much more involved in portfolio companies than the firms who diversify their portfolios. This suggests that organizational focus is an important construct for explaining the degree of support accorded to portfolio companies by venture capitalists. The research also evaluates the performance outcomes of VC firm organization.Originality/valueThe research emphasizes the importance of organizational factors in the investment strategies of venture capital firms.