International Coercion, Emulation and Policy Diffusion: Market-Oriented Infrastructure Reforms, 1977-1999

Why do some countries adopt market-oriented reforms such as deregulation, privatization and liberalization of competition in their infrastructure industries while others do not? Why did the pace of adoption accelerate in the 1990s? Building on neo-institutional theory in sociology, we argue that the domestic adoption of market-oriented reforms is strongly influenced by international pressures of coercion and emulation. We find robust support for these arguments with an event-history analysis of the determinants of reform in the telecommunications and electricity sectors of as many as 205 countries and territories between 1977 and 1999. Our results also suggest that the coercive effect of multilateral lending from the IMF, the World Bank or Regional Development Banks is increasing over time, a finding that is consistent with anecdotal evidence that multilateral organizations have broadened the scope of the “conditionality” terms specifying market-oriented reforms imposed on borrowing countries. We discuss the possibility that, by pressuring countries into policy reform, cross-national coercion and emulation may not produce ideal outcomes.http://deepblue.lib.umich.edu/bitstream/2027.42/40099/3/wp713.pd

A study of decision making, capabilities and performance in the venture capital industry

Understanding sequential resource allocation decisions within organizations is central to strategic management and organization theory. However, little is known about the management of sequential investments, and the performance implications thereof. This study aims to contribute to the understanding of resource allocation processes by examining sequential investments in the venture capital industry. I first examine whether the aggregate patterns of sequential investments in the venture capital industry conform to the normative model of decision making. The main argument is that if venture capitalists terminate investments at the right time, then the probability distribution of their sequential investment decisions over time should mirror the probability distribution of portfolio companies\u27 success over time. The longitudinal data set comprises venture capital investments spanning 1989–2001, and their performance. The results suggest that venture capital investment decisions depart systematically from the expectations of normative theory. Second, I report the results of a qualitative study that examines the behavioral micro-foundations of the observed pattern. This study involves interviews with venture capital professionals and portfolio company managers about the sequential investment decision making process. Findings suggest that individual decision biases only partially account for the observed results. I find that the structure of venture capital investments create perverse incentives for investors to continue investing in unsuccessful portfolio companies. In particular, co-investor pressure, interpersonal dynamics among general partners, and limited fond duration may create pressures to overinvest. Third, I investigate the differences among venture capital firms in their decision making practices and their performance implications. I examine the number of rounds invested in companies by each venture capitalist through a longitudinal data set of investments between 1979–2001. I find that there are no differences among venture capitalists in their ability to manage successful investments. In contrast, I find that venture capitalists differ significantly in their ability to terminate failing investments. In particular, firms with more investment experience and less organizational slack seem to be better at terminating unsuccessful investments. I also find that the ability to terminate unsuccessful investments at the right time is a significant predictor of long-run film performance

A study of decision making, capabilities and performance in the venture capital industry

Understanding sequential resource allocation decisions within organizations is central to strategic management and organization theory. However, little is known about the management of sequential investments, and the performance implications thereof. This study aims to contribute to the understanding of resource allocation processes by examining sequential investments in the venture capital industry. I first examine whether the aggregate patterns of sequential investments in the venture capital industry conform to the normative model of decision making. The main argument is that if venture capitalists terminate investments at the right time, then the probability distribution of their sequential investment decisions over time should mirror the probability distribution of portfolio companies\u27 success over time. The longitudinal data set comprises venture capital investments spanning 1989–2001, and their performance. The results suggest that venture capital investment decisions depart systematically from the expectations of normative theory. Second, I report the results of a qualitative study that examines the behavioral micro-foundations of the observed pattern. This study involves interviews with venture capital professionals and portfolio company managers about the sequential investment decision making process. Findings suggest that individual decision biases only partially account for the observed results. I find that the structure of venture capital investments create perverse incentives for investors to continue investing in unsuccessful portfolio companies. In particular, co-investor pressure, interpersonal dynamics among general partners, and limited fond duration may create pressures to overinvest. Third, I investigate the differences among venture capital firms in their decision making practices and their performance implications. I examine the number of rounds invested in companies by each venture capitalist through a longitudinal data set of investments between 1979–2001. I find that there are no differences among venture capitalists in their ability to manage successful investments. In contrast, I find that venture capitalists differ significantly in their ability to terminate failing investments. In particular, firms with more investment experience and less organizational slack seem to be better at terminating unsuccessful investments. I also find that the ability to terminate unsuccessful investments at the right time is a significant predictor of long-run film performance

Institutions and the internationalization of US venture capital firms

In recent years, venture capital firms have increasingly turned to foreign countries in search of investment opportunities. The cross-border expansion of venture capital firms presents an interesting case of internationalization, because they are at variance with both conventional portfolio and direct investment models. Given the specific nature of venture capital investing, a new theoretical perspective is needed to understand foreign venture capital investments. This paper contributes to international business research by examining the features of the institutional environment that influence venture capital firms’ foreign market entry decisions, and how their effect changes as firms acquire experience. We report results on 216 American venture capital firms potentially investing in 95 countries during the 1990–2002 period. We find that venture capital firms invest in host countries characterized by technological, legal, financial, and political institutions that create innovative opportunities, protect investors’ rights, facilitate exit, and guarantee regulatory stability, respectively. We also find that as firms gain more international experience, they are more likely to overcome constraints related to these institutions.

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

Fail often, fail big, and fail fast? Learning from small failures and R&D performance in the pharmaceutical industry

Do firms learn from their failed innovation attempts? Answering this question is important because failure is an integral part of exploratory learning. In this study, we explore whether and under what circumstances firms learn from their small failures in experimentation. Building on organizational learning literature, we examine the conditions under which prior failures influence firms’ R&D output amount and quality. An empirical analysis of voluntary patent expirations (i.e., patents that firms give up by not paying renewal fees) in 97 pharmaceutical firms between 1980 and 2002 shows that the number, importance, and timing of small failures are associated with a decrease in R&D output (patent count) but an increase in the quality of the R&D output (forward citations to patents). Exploratory interviews suggest that the results are driven by a multi-level learning process from failures in pharmaceutical R&D. The findings contribute to the organizational learning literature by providing a nuanced view of learning from failures in experimentation

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