Venture Firms Research Articles

An Explorative Study of Firm Age, Experience and OLC Stage : Focus on Korean Venture Firms

An Explorative Study of Firm Age, Experience and OLC Stage : Focus on Korean Venture Firms

The Performance Effects of Independent Directors: A Large‐Scale Study of Danish New Ventures

ABSTRACTResearch Question/IssueThis study investigates the effects of independent outside directors on the performance of new venture firms. We also study several factors moderating the relationship between the percentage of independent directors on boards and the new ventures' performance.Research Findings/InsightsUsing a large‐scale sample of 5183 Danish new ventures active in 2015–2020, we find support for our hypothesis that the percentage of independent directors has an inverted U‐shaped effect on new venture performance. The results also show that firm‐level factors, that is, founder equity and venture age, cushion and amplify this nonlinear effect.Theoretical/Academic ImplicationsDrawing on resource dependence theory as an exchange theory, we propose that increasing the proportion of independent directors yields linearly increasing gains (i.e., resource‐provisioning benefits) but also induces costs of sacrificing managerial control, which accelerate nonlinearly. Our findings show that a smaller proportion of independent directors benefits new ventures, but as their proportion grows, the performance gains become smaller, eventually leading to negative marginal effects.Practitioner/Policy ImplicationsPractitioners will find our findings of interest because, contrary to the recommendations of policymakers and many prior studies, they show that having a high proportion of independent directors on the boards of new ventures does not always improve new venture performance. Founders of new ventures should be aware of the trade‐off between the benefits of obtaining additional resources and the costs of sacrificing managerial control.

The Comparative Impact of Conventional and Digital Innovations on Driving Corporate Sustainability: The Case of Venture Firms in South Korea

While previous studies have focused on either conventional or digital innovations individually, few have empirically compared the relative impact of these two types of innovation on firm sustainability. Furthermore, few earlier studies have applied a dynamic capabilities perspective and a technology acceptance model (TAM) to understand how innovation strategies affect long-term competitiveness, particularly when targeting venture firms. In this vein, the aim of this study is to identify the factors that play an important role in the sustainability of venture firms and, in particular, to demonstrate which factor has a more positive effect between conventional innovation and digital innovation, which has recently been considered to be crucial. In this study, ‘corporate sustainability’ refers to the ability of venture firms to secure long-term growth potential and operational and resource efficiency, and the ability to maintain a continuous competitive advantage, even in a rapidly changing market environment. This is especially related to the ability of firms to adapt to change, maintain performance, and create new opportunities through innovation using digital technology. Based on the secondary data jointly surveyed by the ‘Korean Ministry of Small- and Medium-sized Enterprises and Startups’ and the ‘Korea Venture Business Association (KOVA)’, a regression analysis of 3000 data collected in 2022 was conducted. According to the result, both conventional and digital innovations are vital factors, but we found that digital-business-model innovation had a stronger impact for venture firm sustainability. This result provides valuable implications for improving the competitiveness and maintaining the sustainability of venture firms.

How Founders’ Prior Experiences Shape Their Perceptions on Venture Growth and Competitiveness

Founder’s prior experience has been considered crucial for growth and success of venture firms. Despite the extant research on entrepreneurial experience, little is known about how entrepreneurs’ prior experiences are imprinted on them and the differences in knowledge these experiences shape. Based on the theories of entrepreneurial learning and effectuation-causation, this article investigates the influence of entrepreneurs’ prior firm founding and industry work experience. We tested hypotheses regarding the impact of these two types of entrepreneurial experience on the perception of long-term growth expectations and competitiveness of venture firms they found. The analysis was conducted on 1,610 newly founded venture firms in Korea surveyed over a four-year period from 2014 to 2017, and the ordered logit model was employed. The results show that prior firm founding experience results in positive long-term growth expectation. On the other hand, prior industry work experience has a positive effect only on organisation management competitiveness and has no statistically significant effect on technology competitiveness. This study extends the discussions of existing literature by focusing on the impact of founders’ prior experience on perceptions of their venture firms. Different role of entrepreneurial experiences can be explained by the different nature of the knowledge that is formed.

Environmental innovation subjects: current legal challenges

Problem setting. Environmental innovation is a key element of a sustainable development strategy aimed at reducing the negative impact of human activity on the environment. They consist in the implementation of new technologies, processes, products or services that have a lower negative impact on nature compared to traditional solutions. A central aspect of environmental innovations is the participation of entities that contribute to their development and implementation. In all industrialized countries, innovation is one of the priority directions in government policy, because it is the basis of national independence and economic development. The state creates favorable conditions for innovative activity, forming uniform civilized rules and mechanisms that determine the development of all subjects of the innovation sphere. Analysis of recent researches and publications. In particular, in this area there were publications of legal scholars: G.V. Anisimova, V.L. Bredikhina, M.V. Krasnova, Yu. Yu. Bakai, D.V. Zadikhailo and others. Purpose of research consists in determining and making proposals to the current legislation in a certain topic. Article’s main body. The subjects of the modern market of ecological innovations are the state, enterprises, organizations, institutions, universities, foundations, natural persons (scientists and specialists), who ensure the processes of generation and distribution of ecological innovations Organizational and legal forms of innovative activity in the environmental sphere are technoparks, technopolises, business incubators, innovation centers, venture firms, consulting and analytical firms. Conclusions and prospects for development. Technoparks, in today’s world, the latter play a significant role in promoting the direct development of environmental innovations. Their existence is based on the creation of a favorable environment for interaction between scientific institutions, business and authorities with the aim of joint creation and implementation of new technologies of environmental direction. Science parks should contribute to the support of startups, the direction of which is primarily the development and implementation of environmental technologies, including the development of efficient renewable energy sources, waste-free / low-waste materials and other products aimed at reducing the negative impact on the environment. Clusters, in turn, facilitate the concentration of enterprises operating in similar or complementary segments of the economy, thereby allowing them to jointly develop and implement environmental innovations through the exchange of knowledge and resources. Innovative business incubators have the opportunity to provide startups with financial support. It is about receiving grants, investments, etc. Such financial support will allow startups to work on their ideas, develop products and introduce them to the market. Second, business incubators can provide expert support. For example, business consulting, technical advice, marketing or product development support. Experts at the incubator guide startups through the various stages of development, from ideation to commercialization, helping them avoid common mistakes and use best practices.Industrial parks act also as one of the subjects of ecological innovation relations due to their ability to unite production enterprises in order to jointly implement ecological technologies and practices. They can be involved in the implementation of energyefficient technologies, renewable energy, the development and implementation of efficient use of water resources, as well as waste management. Industrial parks can create favorable conditions for cooperation between enterprises in the field of environmental research and development, as well as promote the exchange of knowledge and experience in this area. Thus, the main goal common to all these subjects is to promote the development and implementation of environmentally friendly technologies with the aim of preserving the environment, as well as ensuring sustainable development.

Unpacking unfair transaction experiences, competition, and imports in technology-intensive SMEs' FDI

Unpacking unfair transaction experiences, competition, and imports in technology-intensive SMEs' FDI

Token-Based Crowdfunding: Investor Choice and the Optimal Timing of Initial Coin Offerings

This article examines the operating and financial performance of venture firms conducting initial coin offerings (ICOs) with different types of investors and at different points along a venture’s life-cycle. Relative to purely crowdfunded ICO ventures, institutional investor-backed ICO ventures exhibit weaker operating performance and fail earlier. However, conditional on survival, these ventures financially outperform their peers that do not receive institutional investor support. The diverging effects of investor backing on financial and operating performance are consistent with our theory of “certification exploitation” through a new form of a pump-and-dump scheme. Institutional investors exploit their reputation to drive up ICO valuations and quickly exit the venture post-ICO, with the difference in pre- versus post-certification token prices being their exploitation profit in liquid markets for startups. Our findings further indicate that there is an inverted U-shaped relationship between the financial success of an ICO and the timing along a venture’s life-cycle, with the product piloting phase representing the pivotal point. JEL Codes: G24, G32, K22, L26

벤처기업 창업자의 창업경험, 비즈니스 모델 혁신 및 자금조달이 초기 성과에 미치는 영향

Purpose - The purpose of this study is to examine the effect of entrepreneurial experience, business model innovation and financing on new venture performance. Design/methodology/approach - This study analyzes survey data on new ventures in Korea and investigated research hypothesis by multiple regression analysis. Findings - Founders' prior startup experience have different impacts on performance depending on whether they had a successful or failed startup. Successful experience has a positive impact on early performance, while failure experience has a negative impact. Business model innovation shows a positive and significant relationship with early performance. External financing has different effects depending on the type of funding source and performance variables. VC funding is positively related to employment creation, while government R&D funding is negatively related to sales volume. Research implications or Originality - This study confirms that the impact of entrepreneurial experience on early performance varies depending on the characteristics of successful and unsuccessful entrepreneurs. It also empirically confirms that business model innovation has a significant impact on early performance. We empirically examine the relationship between various external financing sources of venture firms and early performance. Since the effects of entrepreneurial experience, business model innovation, and external financing on early stage performance may be different, entrepreneurs should consider these relationships when pursuing early stage business opportunities.

The Benefits of Cross-Border Corporate Venture Capital Investment on the Likelihood of a Venture Firm’’s IPO

Purpose - Extant research indicates that CVC investments create value for venture firms and generally enhance the likelihood of a successful venture exit. In particular, despite the globalization of CVC investments, the impact on venture firm exit performance has been largely overlooked. Thus, this study explores the impact of cross-border CVC investments on the likelihood of a venture firm’s IPO. We argue that the foreignness of CVCs increases the likelihood of IPO, but this positive relationship is weakened when CVC units have a tight structure.
 Design/Methodology/Approach - The hypotheses are tested with 1,874 high-technology venture firms in the U.S. that received CVC investments between 1994 and 2009. A two-stage analysis was employed to address potential selection bias. In the first stage, we employed a probit model to predict the probability of receiving cross-border CVC investment. In the second stage, we conducted a probit regression analysis on the likelihood of IPO, incorporating the inverse Mills ratio to address selection bias.
 Findings - We found that the foreignness of CVCs increases the likelihood of a venture firm’s IPO. However, this positive impact is weakened when CVCs have a tight governance structure.
 Research Implications - This study highlights the benefits of cross-border CVC investments and enriches resource dependence theory by reconciling it with institutional theory, depicting the importance of both reducing resource constraints to create value for venture firms and the institutional logic pursued by CVCs. This study suggests that entrepreneurs should be careful with CVC units that prioritize strategic objectives.

Impact of Weibo sentiment and R&D innovation as signalling mechanisms on venture corporate financing

ABSTRACT Weibo sentiment and R&D innovation are important signals that influence the financing processes of venture corporations. We collect relevant data between 1 January 2011, and 31 December 2020, to analyse the effect of the signalling mechanism of Weibo sentiment and R&D innovation on venture corporate financing. The conclusions are as follows. The positive effects of Weibo sentiment on venture valuation and investment success are weaker than the effects of R&D innovation, and the positive effects of Weibo sentiment and R&D innovation on venture valuations are stronger for young than older venture firms. The positive effects of Weibo sentiment and R&D innovation on venture valuations are stronger for less experienced ventures than for more experienced ventures. These conclusions show that the two signals of Weibo sentiment and R&D innovation have different strengths in terms of venture valuation and investment success, with the effect of the Weibo sentiment signal being relatively less strong. Moreover, venture corporate age and venture corporate experience play important negative moderating roles in the relationship between the two signals and venture valuation.

Navigating Opportunities and Challenges: A Comprehensive Study of Venture Companies' Strategies and Competitiveness

To establish a competitive position in the era of relentless competition, the enduring secrets of venture companies lie in continuous technological innovations and ground breaking ideas. The categorization of strategic types and groups derived from the strategic dimensions of venture firms is expected to provide valuable insights for aspiring new entrants into the venture industry. This study examines the managerial shortcomings and financial constraints faced by venture firms in existing research, aiming to identify the core competitiveness of these firms by scrutinizing government support for start-ups and the challenges venture companies encounter in their interactions with large corporations. Additionally, the research analyzes the factors contributing to the failure of venture firms and examines the successful strategies employed by successful venture companies, endeavoring to address various challenges and illuminate success strategies through the perspective of successful ventures.

4차산업 기술 중소기업의 비즈니스모델혁신

This study aims to examine the causal link among three constructs of corporate entrepreneurship strategy - an entrepreneurial strategic vision, organizational architecture, and entrepreneurial orientation -, business model innovation, and performance, with a focus on the moderating effect of environmental munificence. Building on literature review regarding key constructs, hypotheses are developed and tested using data collected from 301 small and medium sized venture firms. The data are based on the 2022 Factual Survey of Entrepreneurship (Firm level) conducted by Korea Entrepreneurship Foundation. Results show that the three constructs of corporate entrepreneurship strategy are found to have a significantly positive effect on business model innovation, which sequentially affects the outcome. The environmental munificence has a significantly negative moderating effect on the association between both the strategic vision and entrepreneurial orientation and business model innovation, while having a non-significant impact on the link between organizational architecture and the innovation. These results indicate that the corporate entrepreneurship strategy can serve as a useful means which contributes to the performance-oriented business model innovation. The findings imply that, in a fast-changing business environment by the 4th industrial revolution, resource-constrained small and medium-sized firms should focus on a strategic vision and entrepreneurial orientation to have the innovative business model.

Application of Two-sided Matching Theory in Financing of Small and Medium-sized Enterprises

The nation's small and medium-sized businesses (also known as SMEs) constitute an essential component of the economy as a whole; yet, many companies are right now struggling to obtain adequate funding. On the one hand, increasing the amount of capital invested in venture firms by venture capitalists can considerably promote the development of venture enterprises. On the other hand, venture capitalists look for businesses in which they may invest, with the goal of achieving high levels of success and gaining substantial profits. Therefore, in order to make a reasonable and stable match between venture capitalists and SMEs according to their respective preference lists, this paper makes use of the Gale-Shapley algorithm, which is part of the two-sided matching theory. This helps improve cooperation efficiency and maximizes the benefits for both parties. In addition to that, based on the algorithm, this article offers some policy recommendations for the venture capital market in China.

Follow Me Going Out: Cross-Border Investment of Domestic Venture Capital and Overseas Listing of Portfolio Companies

This paper investigates the impact of cross-border investment of domestic venture firms (VCs) on the overseas listings of their domestic portfolio companies. Using a sample of 1,439 domestic VCs’ first-round domestic investment events collected by Crunchbase and PEDATA, we find that the more cross-border investment experience domestic VCs have, the more likely their domestic portfolio companies are to go public outside China. The findings remain robust after using the instrumental variable method to eliminate endogeneity, the Heckman two-stage regression method to eliminate sample selection bias, and the exclusion of a portion of the sample for reregression. In addition, we further find that foreign VCs participating in follow-on financing play a mediating role in the relationship between the cross-border investments of domestic VCs and the overseas listings of their portfolio companies. This paper reveals the critical path for domestic VCs to go out and bring in foreign VCs to promote overseas listings of domestic firms. The findings of this paper are critical to the layout of domestic VCs’ internationalization strategy and the sustainable development of domestic firms.

The Optimal Open Innovation Strategy with Science-based Partners for Venture Firm’s Innovation Capabilities: Focusing on Innovation Modes

This study explores the difference in the effects of innovation modes on innovation capabilities dividing various collaborative activities conducted by venture firms with science-based partners into innovation modes. Venture firms that relatively lack the resources and capabilities for innovation perform various collaborative activities such as marketing support and management support as well as research and development collaboration with science-based partners. However, this has not received proper attention in the literature on open innovation. We classified venture firms according to innovation modes and compared each group through a multi-treatment model. As a result, we found that there was a difference in the impact on innovation capability according to the innovation mode with science-based partners. This study contributes to enriching the empirical bodies of open innovation research. In addition, it suggests that there is a need for a portfolio approach considering the innovation modes by establishing policies at the level of collaborative activities in supporting the collaboration of venture firms.

Sustainability in Private Capital Investing: A Systematic Literature Review

The private capital asset class has grown to over $10 trillion in assets under management and has significant potential to contribute to environmental, social, and governance (ESG) goals. However, there is a dearth of academic research about ESG with regards to private capital investing. This literature review adopted a mixed-methods approach, combining a quantitative (bibliometric) analysis with a qualitative review of the articles. It was found that less than 1% of the literature, written in English, between 1960-2020 on private equity and venture capital addresses topics related to sustainability. It was also observed that the 46 papers which address sustainability topics can be categorized into 13 themes, including certifications and standards, impact investing, and corporate social responsibility. Investment in private securities grew at twice the rate as public securities during the end of this time-period and interest in sustainability integration in private capital investing is growing. Incentives for private equity and venture firms to engage with sustainable investments are being driven by institutional investors, such as pension funds and insurance companies. The focus of sustainability research has typically been on public markets, hindering the potential of private capital investment to influence sustainable policy and practices. The objective of this paper is to provide evidence of the dearth of academic literature on the topic of private capital markets and sustainable investment, while identifying current themes in the existing literature so that future work may address gaps in research.

Growth of Venture Firms under State Capitalism with Chinese Characteristics: Qualitative Comparative Analysis of Fuzzy Set

This study builds upon the venture growth literature and venture legitimation mechanisms and investigates how venture firms in China can acquire legitimacy and necessary resources from state stakeholders for venture growth during the COVID-19 pandemic. To offer a context-specific perspective of Chinese ventures’ legitimation strategies, we discuss that under Chinese state capitalism, these ventures need to follow lingering socialist values, such as equality and social stability, to be recognized as appropriate business operations by state audiences. Furthermore, we discuss that access to necessary resources for venture growth is limited during crises. Based on the understanding of particular contexts of Chinese state capitalism and the COVID-19 pandemic, we examine how various sets of a venture’s identity, associative, and organizational mechanisms influence venture growth during crises in China. In addition, we consider serial entrepreneurship as a contextual factor affecting the effectiveness of causal effects. This study applies the fuzzy-set qualitative comparative analysis method to take a configurational approach and identify multiple concurrent causality of legitimacy mechanisms on venture growth. We conduct a survey and analyze data from 107 entrepreneurs of Chinese technology ventures during the COVID-19 pandemic. Findings show that Chinese ventures with or without repeat entrepreneurs can actively utilize various sets of legitimation mechanisms to acquire legitimacy and necessary resources from Chinese state audiences for venture growth during adversity. This study provides comprehensive understanding and practical implications on Chinese ventures’ legitimation strategies for venture growth during crises.

Supply chain capabilities and new venture growth

ABSTRACT We build on dynamic capability (DC) theory and apply inductive case study research to shed light on how new venture manufacturing firms develop and nurture supply chain (SC) capabilities. Our findings discern SC capabilities related to dimensions of DCs (sense, integrate, develop, reconfigure) and show how these SC capabilities evolve throughout new venture life cycle stages. We find that SC capabilities steadily substitute improvisation and imitation. Our study also reveals that SC capabilities serve as dual-purpose capabilities with an operational as well as a dynamic role. On the one hand, they are needed to operate the supply chain and enable the development and reconfiguration of the internal resource base. On the other hand, they allow for the sensing and integration of external resources and create new or update and modify existing SC capabilities. New venture firms can benefit from our study by mimicking the development of the different SC capabilities.

A cloud's silver lining? The impact of policy interventions on new and maturing technology ventures' online recruitment

Abstract Research summaryWe synthesize the external enablement (EE) framework with insights from labor economics and strategic human capital to theorize how restrictive policy interventions shape technology ventures' employee recruitment, attending to both sides of the hiring dyad. We engage in a quantitative study of over 220,000 recruiting interactions between technology ventures and candidates on a prominent digital networking platform surrounding the early COVID‐19 pandemic policy responses. We find that firms' recruitment declined significantly while candidates' responsiveness increased during the early COVID‐19 policy interventions. In turn, young technology ventures were enabled to hire more during the interventions, whereas maturing ventures were enabled to hire differently—acquiring candidates with greater entrepreneurial orientation. Our work extends the EE framework to human resource strategies and to heterogeneous enablement across firm age.Managerial summaryHiring is a critical task for young and maturing venture firms, and environmental disruptions can impinge heavily on recruiting processes. We study how restrictive policy interventions shape technology ventures' employee recruitment. Examining over 220,000 recruiting interactions on a major digital platform before and during the early COVID‐19 policy responses, we find that restrictive policy interventions alter the technology venture labor market, deterring some firms from recruiting while making others more successful in their continued hiring efforts. Furthermore, we discover that maturing firms are more adaptive than young firms in their selection of candidates during policy interventions—seeking employees with more entrepreneurial characteristics.

Startup Financing: Some Evidence from the Indian Venture Capital Industry

This study analyses the venture capitalists’ evaluation of startups in the Indian context by using primary data obtained from a survey study of representatives drawn from the industry. A distinguishing feature of the study is the categorization of venture capitalists on the basis of their stage of financing for analyzing the nature of diversification prevalent in the industry, the rank order of risks as perceived by the different categories of venture capitalists, and their expected risk premium. The findings of the study suggest the existence of two broad categories of venture capitalists; those involved in early-stage financing and those who invested across the life stages of startups. Furthermore, results indicate that each of these two categories of venture firms attaches varying importance to the broad considerations that are known to impact a startup’s value, they are differently diversified, their rank order of perceived risks is different and so is the expected risk premium.