Does Social Similarity Pay Off? Homophily and Venture Capitalists’ Deal Valuation, Downside Risk Protection and Financial Returns in India

Claes, Kim; Vissa, Balagopal

doi:10.2139/ssrn.3424851

Cited by 8 publications

(15 citation statements)

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“…An assessment requires collective understanding of qualitative information. Claes and Vissa (2020) found that founders with a combination of lower caste and higher education get higher preference, suggesting the moderating effect of social settings. passion Passion motivates individuals to act.…”

Section: Educationmentioning

confidence: 99%

“…In addition to cultural distance (Moore et al, 2015), the information gap caused by distance also affects investment decisions found that though foreign VCs may have a relative advantage in experience and resources, they are constrained by the information friction due to the geographic distance. Distance creates uncertainty and reduces the funding likelihood (Claes & Vissa, 2020;Hain et al, 2016;Sorenson & Stuart, 2001), as venture and VCs located in the same geographic area affect funding positively (Li & Mahoney, 2011). This shows the riskaverse nature of VCs (Chircop et al, 2020).…”

Section: Organisation Experiencementioning

confidence: 99%

“…For early stage ventures, human and social capital are the real assets (Hsu, 2007), and VCs place more importance on team's quality (Fisher et al, 2017;Gompers et al, 2020). Assessing the team's qualitative information is difficult (Kollmann & Kuckertz, 2010) and hence, VCs prefer comparable information and look for teams with more social and human capital, such as those with high level of education, skills and experience (Claes & Vissa, 2020;Franke et al, 2006;Murnieks et al, 2011).…”

Section: Teammentioning

confidence: 99%

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Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalist’s Decision

Vazirani

Bhattacharjee

2021

The Journal of Entrepreneurship

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Investments in new ventures are risky due to lack of conventional form of quantitative information and untested products. Venture capitalists (VCs) are seen to target such new ventures for high-risk premium but with little success. Existing research has investigated and identified a variety of qualitative factors that impact VCs’ investment decisions; however, many research gaps still exist. Works published in the last two decades show the evolution in the preference of factors with the focus shifting from venture’s team and product to factors such as intellectual property rights, economic crisis and social capital. It was found that the factor’s role was limited to the binary scale (positive and negative), which undermines its effect. The purpose of this review is to provide a comprehensive framework of factors that influence VCs’ investment decisions and show theoretical research gaps. Accordingly, we have segmented factors into two macro-categories: ‘internal’ and ‘external environment’, and presented a detailed framework of the factors that influence VCs’ investment decisions. Further, we argue to consider the subjectivity of qualitative factors and to explore the role of a factor in the decision-making.

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Section: Educationmentioning

confidence: 99%

Section: Organisation Experiencementioning

confidence: 99%

Section: Teammentioning

confidence: 99%

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Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalist’s Decision

Vazirani

Bhattacharjee

2021

The Journal of Entrepreneurship

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“…The past decade has also seen tremendous innovations in the technological, organizational, and business models used in emerging economies. These innovations include technological advances that leapfrog mature economies, new ways of organizing and scaling growth ventures, novel forms of social entrepreneurship, consolidation of fragmented markets, creation of new market niches, and development of a new social ecology of entrepreneurs (Claes & Vissa, 2020;Dunlap & Klueter, 2018;Shankar & Narang, 2019;Wan & Wu, 2017;Winterhalter, Zeschky, Neumann, & Gassmann, 2017). These phenomena are important and are worthy of study in their own right.…”

mentioning

confidence: 99%

Entrepreneurship in emerging economies

Foo

Vissa

2020

Strategic Entrepreneurship

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Research Summary The economic center of gravity is shifting from mature markets to emerging regions. This shift provides a good opportunity to broaden and deepen our theoretical base of concepts and frameworks because emerging and mature regions differ significantly in their institutional regimes. Hence entrepreneurial resource mobilization in emerging regions could differ significantly because of theoretical differences in actors' action logics and resource governance. The eight papers in this special issue provide new empirical evidence on antecedents and consequences of entrepreneurial resource mobilization efforts in emerging regions. Here, we briefly summarize the state of the field, introduce the articles by situating them in a novel theoretical framework on entrepreneurial resource mobilization, and finally using our framework, we suggest opportunities for future research on entrepreneurship in emerging regions. Managerial Summary Entrepreneurship research has advanced mainly using empirical data from the developed economies of North America and Western Europe. Because emerging economies differ markedly in their institutional development from developed economies, this prior research is less likely to be useful to understand entrepreneurship in emerging regions ‐ which are increasingly crucial components of the global economy. This special issue contains eight articles addressing different aspects of the entrepreneurial resource mobilization process using diverse research methods on empirical data drawn from a broad range of emerging economies. This introduction describes the state of the field prior to the special issue, introduces the special issue articles and identifies topics that still need further investigation. We distill the current state of knowledge and offer a roadmap for future scholarship.

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“… 1 The social identification effects that common affiliations engender can operate in large part by bypassing an individual’s deliberate cognitive processes and by developing a visceral attraction between actors who share the same institutional affiliation (Rider, 2011; Claes and Vissa, 2020). But our interviews revealed that affiliations can sometimes trigger more rational cognitive analysis.…”

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confidence: 99%

Quo Vadis? From the Schoolyard to the Courtroom

Sytch

Kim

2020

Administrative Science Quarterly

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Existing theories exploring how companies interact with the law stop short of unveiling whether and why companies can differentially pursue, interact with, and benefit from a particular legal environment. We theorize that companies can use social structures—shared educational and professional affiliations—between lawyers and judges to strategically pursue specific legal jurisdictions, influence judges’ discretion, and ultimately reap different legal outcomes from the same legal environment. Using data on such affiliations between lawyers and federal judges, we examine companies’ choice of U.S. federal district courts and their legal outcomes in patent infringement litigation from 1990 to 2013. Our results reveal that companies strategically pursue courts in which their lawyers have past educational or professional affiliations with the courts’ judges. If a desired judge is assigned to the case, a company leverages its lawyers’ social structures to tailor any legal communication to match that judge’s style. While such behavior results in a higher likelihood of winning a lawsuit, it also creates an inherent risk. In stacking their legal teams with lawyers who have connections to judges, companies often shortchange the human capital—lawyers’ skillsets—required to win a case, which adversely affects legal outcomes if the desired judge is not assigned to the case.

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Does Social Similarity Pay Off? Homophily and Venture Capitalists’ Deal Valuation, Downside Risk Protection and Financial Returns in India

Cited by 8 publications

References 0 publications

Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalist’s Decision

Entrepreneurial Finance in the Twenty-first Century, a Review of Factors Influencing Venture Capitalist’s Decision

Entrepreneurship in emerging economies

Quo Vadis? From the Schoolyard to the Courtroom

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