Interorganizational imitation and acquisitions of high-tech ventures

Research summary: This article shows that there is a positive association between the changes in the number of prior acquisitions or the changes in the prominence of prior acquirers within the focal venture's subfield and the venture's likelihood to be acquired. Results are in line with the existence of frequency- and trait-based imitation in acquisitions targeting tech ventures. More importantly, these positive associations are more pronounced when (a) exogenous technological uncertainty within the venture's subfield increases and (b) there are significant differences between the focal venture's and acquirer's technological resources. Our findings are in accord with the suggestion that uncertainty in the technology domain is an important boundary condition in moderating the extent of imitation in technology acquisitions. We also discuss alternative explanations and implications. Managerial summary: The findings of this article suggest that when deciding whether or not to acquire a technology venture (i.e., startup company in a high-tech industry), managers infer information by observing other acquisitions in the venture's subfield to make assessments about the underlying value of the potential targets. We also find that receiving some informational cues from previous acquisitions would be more useful when there is high technological uncertainty in the potential target's subfield about which technologies will be dominant, and when the potential acquirer and the tech venture operate in dissimilar technological areas. This article shows that imitation can be one way to deal with decision-making under uncertainty when making acquisition decisions in high-tech environments. Copyright © 2017 John Wiley & Sons, Ltd

The impact of portfolio composition on affiliation benefits

This study argues and empirically demonstrates that the value of a venture's affiliations depends in part on its relative standing in the portfolio of affiliations held by its partners. Relative standing is determined by how the venture ranks among other ventures in the partner's portfolio with respect to observable signals of quality. We argue that the relative standing of a venture in its partner's portfolio influences the focal venture's access to the partner's resources and, subsequently, the venture's performance. We also argue that a venture's relative standing becomes a more important predictor of performance when the partner has a larger portfolio or higher status. An empirical test of the equity investments by venture capital firms in 1011 private biotechnology ventures between 1980 and 2004 provides support for the hypothesized relationships

Small fish, big fish: the performance effects of the relative standing in partners' affiliate portfolios

This study examines whether the value a venture derives from an affiliation depends on its relative standing in the portfolio of all affiliations held by its partner. Relative standing refers to how thenventure ranks among other ventures in the partner’s portfolio with respect to expected returns. The relative standing of a venture in its partner’s portfolio influences the venture’s access to the partner’s resources and the venture’s performance. We also argue that a venture’s relative standing becomes more important to performance when the partner has a larger portfolio or higher status. In addition to a field study, we test the effect of a venture’s relative standing in a venture capital portfolio on its exit likelihood, controlling for endogeneity. We find support for our hypotheses