Network, network position and the deal flow of venture capital firms

• Netzwerk, Netzwerkposition und der Deal Flow von Venture Capital Gesellschaften

Böhner, Ingo; Brettel, Malte (Thesis advisor)

Aachen : Publikationsserver der RWTH Aachen University (2007)
Dissertation / PhD Thesis

Aachen, Techn. Hochsch., Diss., 2007

Abstract

Based on the views how networks create social capital, this book analyzes the positions that Venture Capital firms (VCs) hold in their syndication network and determines the effect that network positions have on generating deal flow quantity and quality. Network closure (Coleman 1988) emphasizes that cohesive network structures facilitate cooperative behavior of actors. In contrast, network openness (Granovetter 1973, Burt 1992) stresses that networks characterized by weak ties and structural holes promote the autonomy of actors and their ability to flexibly identify new opportunities. These two theoretical strands lead to different predictions on which structural characteristics of the syndication network are beneficial for VCs to generate deal flow. Using data on syndicated investments in the German venture capital market and data on the deal flow of VCs, the author shows that those firms that hold network positions characterized by network openness have competitive advantages in terms of deal flow quantity and quality. More specifically, VCs have a higher deal flow quantity and quality that have access to non-redundant sources of information, that are less constrained in their actions by the network structure of their direct contacts, and that have multiple ways through which they can reach other VCs in the network. Based on the analyses, the author deducts several recommendations for VCs how to increase their deal flow quantity and quality. In addition, the book delivers a clear contribution for the academic discussion on the connection between social capital, social networks and the effect on the economic outcome of individual actors.

Institutions

• Innovation und Entrepreneurship Group (WIN) [813110]