How Does Long-Term Orientation Influence the Investments of Venture Capitals? Evidence From the Organizational Level.

Tianyi Zheng

doi:10.3389/fpsyg.2022.785643

Abstract

Amid great uncertainty along with the possibility of huge returns, venture investment decisions are both technical and artistic. Past studies have paid much attention to the influences of objective factors on venture investment. However, subjective factors have been relatively ignored. As a salient psychological mechanism, temporal focus is of great importance for venture capitalists when making their investment decisions. This study performed content analysis to investigate how temporal focus at the organizational level affects investment decisions of venture capital (VC) firms. The results revealed that VCs with higher level of long-term orientation prefer to invest in less popular industries and ventures in the expansion period. Meanwhile, they are less likely to invest in very new start-ups. Moreover, long-term oriented VCs tend to re-invest in start-ups in their portfolios instead of just shooting once on numerous single start-ups. However, the author did not find any support on preferences of VCs for ventures with high level of human capital.

Highlights

Venture investment has long been a hot topic in both the entrepreneurship and finance fields (Sahlman and Stevenson, 1985; Hallen and Eisenhardt, 2012; Chircop et al, 2020)
This result suggested that venture capital (VC) with higher level of long-term orientation (LTO) are more interested in investing in ventures in the expansion stage but more conservative in ventures in the early stage
The author discussed the essence of LTO in venture investment

Summary

INTRODUCTION

Venture investment has long been a hot topic in both the entrepreneurship and finance fields (Sahlman and Stevenson, 1985; Hallen and Eisenhardt, 2012; Chircop et al, 2020). VCs with high level of LTO are willing to provide more time for entrepreneurs with high potential to turn their human capital advantages into innovative products and economic returns (Symeonidou and Nicolaou, 2018) During this time, they have the motivation to form long-term relationships and trust with entrepreneurial teams (Flammer and Bansal, 2017; Liu et al, 2019) and provide necessary and useful help. The literature on strategic decisions has suggested that LTO is positively correlated with the speed of introduction of new products (Nadkarni and Chen, 2014) and long-term relationship with stakeholders (Lin et al, 2019) This suggestion may indicate that long-term oriented VCs will form investment ties with start-ups as early as possible. The author supposes that: H4: A VC with higher level of LTO keeps a larger percentage of new ventures in the expansion stage and a smaller percentage of ones in the early or mature stage in its investment portfolios

MATERIALS AND METHODS

RESULTS

Industrial popularity of portfolio

DISCUSSION

Limitations and Future