How and When Investment Horizons Determine Venture Capital Firms' Attention Breadth to Portfolio Companies. (May 2020)

• Record Type: Journal Article
• Authors: Bacon-Gerasymenko, Violetta; Arthurs, Jonathan D.; Cho, Sam Y.
• Is Part Of: Entrepreneurship theory and practice. Volume 44:Number 3(2020)
• Page Start: 475
• Page End: 503
• Publication Date: 2020-05
• Subjects: venture capital -- attention breadth -- expected investment horizons -- investment horizon dispersion -- syndication; Small business -- Periodicals; New business enterprises -- Periodicals; Entrepreneurship -- Periodicals; 658.421
• DOI: 10.1177/1042258718824957
• Languages: English
• ISSNs: 1042-2587

Abstract

This study develops and tests a theory about the antecedents of venture capital firms' (VCs') attention breadth to their portfolio companies (PFCs). We find that VCs expand their attention breadth but only up to a certain level of expected investment horizons for each PFC, after which attention breadth narrows. We also find that this inverted U-shaped relationship is contingent upon the VC investment horizon dispersion and the number of co-investors in a given PFC. Our research advances the entrepreneurship and venture capital literature and provides novel insight into the broader literature on investment horizons and strategic alliances.