Abstract
This chapter identifies and examines the most important complexity factors from Study II, i.e., the ones that affect early stage high-tech startups and their investors the most. It also describes matching signals that startups can send to counter the adverse effects of complexity and newness. This makes it possible to validate key dimensions of investor uncertainties and classes of appropriate signals, which ultimately enables the development of a comprehensive ‘complexity signal framework’ that is specific to early stage high-tech startups.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Literature
Abbot, K., Pendlebury, N., & Wardman, K. (2007). Business law (8th ed.). London: Thomson.
Agrawal, A., Catalini, C., & Goldfarb, A. (2015). Crowdfunding: Geography, social networks, and the timing of investment decisions. Journal of Economics & Management Strategy, 24(2), 253–274.
Ahlers, G. K., Cumming, D., Günther, C., & Schweizer, D. (2015). Signaling in equity crowdfunding. Entrepreneurship Theory and Practice, 39(4), 955–980.
Amit, R., Liechtenstein, H., Prats, I., Millay, T., & Pendleton, L. (2008). Single family offices: Private wealth management in the family context. Working paper from Wharton Global Family Alliance. Retrieved from http://wgfa.wharton.upenn.edu/documents/WhartonGFA_SFO_Study.pdf
Arthurs, J. D., & Busenitz, L. W. (2003). The boundaries and limitations of agency theory and stewardship theory in the venture capitalist/entrepreneur relationship. Entrepreneurship Theory and Practice, 28(2), 145–162.
Baltussen, G., & Post, G. T. (2011). Irrational diversification: An examination of individual portfolio choice. Journal of Financial and Quantitative Analysis, 46(05), 1463–1491.
Barberis, N., & Thaler, R. (2003). A survey of behavioral finance. In G. M. Constantinides, M. Harris, & R. Stulz (Eds.), Handbook of the economics of finance, 1B (pp. 1053–1128). Amsterdam: Elsevier.
Baum, J. A., Calabrese, T., & Silverman, B. S. (2000). Don’t go it alone: Alliance network composition and startups’ performance in Canadian biotechnology. Strategic Management Journal, 21(3), 267–294.
Benson, D., & Ziedonis, R. H. (2009). Corporate venture capital as a window on new technologies: Implications for the performance of corporate investors when acquiring startups. Organization Science, 20(2), 329–351.
Brouthers, K. D., & Brouthers, L. E. (2003). Why service and manufacturing entry mode choices differ: The influence of transaction cost factors, risk and trust. Journal of Management Studies, 40(5), 1179–1204.
Busenitz, L. W., Fiet, J. O., & Moesel, D. D. (2005). Signaling in venture capitalist—New venture team funding decisions: Does it indicate long-term venture outcomes? Entrepreneurship Theory and Practice, 29(1), 1–12.
Carpenter, R. E., & Petersen, B. C. (2002). Capital market imperfections, high-tech investment, and new equity financing. The Economic Journal, 112(February), F54–F72.
CB Insights. (2015). Venture capitalists are bullish on news. Retrieved May 28, 2015, from https://www.cbinsights.com/blog/venture-capital-media-news/
Chesbrough, H. W. (2002). Making sense of corporate venture capital. Harvard Business Review, 80(3), 90–99.
Christensen, E., Wuebker, R., & Wustenhagen, R. (2009). Of acting principals and principal agents: Goal incongruence in the venture capitalist-entrepreneur relationship. International Journal of Entrepreneurship and Small Business, 7(3), 367–388.
Chua, J. H., Chrisman, J. J., Kellermanns, F., & Wu, Z. (2011). Family involvement and new venture debt financing. Journal of Business Venturing, 26(4), 472–488.
Collewaert, V. (2012). Angel investors’ and entrepreneurs’ intentions to exit their ventures: A conflict perspective. Entrepreneurship Theory and Practice, 36(4), 753–779.
Conti, A., Thursby, M., & Rothaermel, F. T. (2013a). Show me the right stuff: Signals for high-tech startups. Journal of Economics & Management Strategy, 22(2), 341–364.
Conti, A., Thursby, J., & Thursby, M. (2013b). Patents as signals for startup financing. The Journal of Industrial Economics, 61(3), 592–622.
David, P. A., Hall, B. H., & Toole, A. A. (2000). Is public R&D a complement or substitute for private R&D? A review of the econometric evidence. Research Policy, 29(4), 497–529.
Davila, A., Foster, G., & Gupta, M. (2003). Venture capital financing and the growth of startup firms. Journal of Business Venturing, 18(6), 689–708.
De Bettignies, J. E., & Brander, J. A. (2007). Financing entrepreneurship: Bank finance versus venture capital. Journal of Business Venturing, 22(6), 808–832.
Duhautois, R., Redor, D., & Desiage, L. (2015). Long term effect of public subsidies on start-up survival and economic performance: An empirical study with French data. Revue d’économie industrielle, 1, 11–41.
Ebben, J., & Johnson, A. (2006). Bootstrapping in small firms: An empirical analysis of change over time. Journal of Business Venturing, 21(6), 851–865.
Edwards, W. (1968). Conservatism in human information processing. In B. Kleinmutz (Ed.), Formal representation of human judgment (pp. 17–52). New York: Wiley.
Elitzur, R., & Gavious, A. (2003). Contracting, signaling, and moral hazard: A model of entrepreneurs, ‘angels’, and venture capitalists. Journal of Business Venturing, 18(6), 709–725.
Evans, J. L. (2004). Wealthy investor attitudes, expectations, and behaviors toward risk and return. The Journal of Wealth Management, 7(1), 12–18.
EY. (2015). Liquidity meets perspective—Venture capital and start-ups in Germany 2015. Berlin: Ernst & Young.
Fairchild, R. (2011). An entrepreneur’s choice of venture capitalist or angel-financing: A behavioral game-theoretic approach. Journal of Business Venturing, 26(3), 359–374.
Florida, R. (2016, February 23). A closer look at the geography of venture capital in the US. The Atlantic. Retrieved from http://www.citylab.com/tech/2016/02/the-spiky-geography-of-venture-capital-in-the-us/470208/
Ghosh, S., & Nanda, R. (2010). Venture capital investment in the clean energy sector. Harvard Business School Entrepreneurial Management Working Paper, 11-020.
Ghosh, M., Dutta, S., & Stremersch, S. (2006). Customizing complex products: When should the vendor take control? Journal of Marketing Research, 43(4), 664–679.
Gilovich, T., Vallone, R., & Tversky, A. (1985). The hot hand in basketball: On the misperception of random sequences. Cognitive Psychology, 17(3), 295–314.
Gomes, J. F., de Weerd-Nederhof, P. C., Pearson, A. W., & Cunha, M. P. (2003). Is more always better? An exploration of the differential effects of functional integration on performance in new product development. Technovation, 23(3), 185–191.
Gompers, P. (1995). Optimal investment, monitoring, and the staging of venture capital. Journal of Finance, 50(4), 1461–1489.
Gompers, P. A., & Lerner, J. (2004). The venture capital cycle (2nd ed.). Cambridge, MA: MIT Press.
González, X., & Pazó, C. (2008). Do public subsidies stimulate private R&D spending? Research Policy, 37(3), 371–389.
Goodhart, C. A. E. (1998). Financial regulation: Why, how, and where now? New York: Routledge.
Grover, V., & Saeed, K. A. (2007). The impact of product, market, and relationship characteristics on interorganizational system integration in manufacturer-supplier dyads. Journal of Management Information Systems, 23(4), 185–216.
Gulati, R., & Higgins, M. C. (2003). Which ties matter when? The contingent effects of interorganizational partnerships on IPO success. Strategic Management Journal, 24(2), 127–144.
Hall, B. H. (2008). The financing of innovation. In S. Shane (Ed.), The handbook of technology and innovation management (pp. 409–430). Hoboken, NJ: Wiley.
Häussler, C., Harhoff, D., & Müller, E. (2009). To be financed or not…—The role of patents for venture capital-financing. ZEW-Centre for European Economic Research Discussion Paper, (09-003).
Hellmann, T. (1998). The allocation of control rights in venture capital contracts. The Rand Journal of Economics, 29(1), 57–76.
Herold, F. (2010). Contractual incompleteness as a signal of trust. Games and Economic Behavior, 68(1), 180–191.
Hobday, M. (1998). Product complexity, innovation and industrial organisation. Research Policy, 26(6), 689–710.
Horstmann, I., MacDonald, G. M., & Slivinski, A. (1985). Patents as information transfer mechanisms: To patent or (maybe) not to patent. Journal of Political Economy, 93(5), 837–858.
Hottenrott, H., Hall, B. H., & Czarnitzki, D. (2015). Patents as quality signals? The implications for financing constraints on R&D. Economics of Innovation and New Technology, 25(3), 197–217.
Hsu, D. H., & Ziedonis, R. H. (2008). Patents as quality signals for entrepreneurial ventures. Academy of Management Proceedings, 2008(1), 1–6.
Jeng, L. A., & Wells, P. C. (2000). The determinants of venture capital funding: Evidence across countries. Journal of Corporate Finance, 6(3), 241–289.
Jensen, M. C. (2005). Agency costs of overvalued equity. Financial Management, 34(1), 5–19.
Lakemond, N., Berggren, C., & Weele, A. (2006). Coordinating supplier involvement in product development projects: A differentiated coordination typology. R&D Management, 36(1), 55–66.
Lindsay, N. J. (2004). Do business angels have an entrepreneurial orientation? Venture Capital, 6(2-3), 197–210.
Mason, C., & Stark, M. (2004). What do investors look for in a business plan? A comparison of the investment criteria of bankers, venture capitalists and business angels. International Small Business Journal, 22(3), 227–248.
Maxwell, A. L., & Lévesque, M. (2014). Trustworthiness: A critical ingredient for entrepreneurs seeking investors. Entrepreneurship Theory and Practice, 38(5), 1057–1080.
Maxwell, A. L., Jeffrey, S. A., & Lévesque, M. (2011). Business angel early stage decision making. Journal of Business Venturing, 26(2), 212–225.
Meuleman, M., & De Maeseneire, W. (2012). Do R&D subsidies affect SMEs’ access to external financing? Research Policy, 41(3), 580–591.
Miller, R. E., & Cote, M. (1987). Growing the next Silicon Valley: A guide for successful regional planning. New York: Free Press.
Novak, S., & Eppinger, S. D. (2001). Sourcing by design: Product complexity and the supply chain. Management Science, 47(1), 189–204.
Ollier, S., & Thomas, L. (2013). Ex post participation constraint in a principal–agent model with adverse selection and moral hazard. Journal of Economic Theory, 148(6), 2383–2403.
Parhankangas, A., & Ehrlich, M. (2014). How entrepreneurs seduce business angels: An impression management approach. Journal of Business Venturing, 29(4), 543–564.
Park, H. D., & Steensma, H. K. (2012). When does corporate venture capital add value for new ventures? Strategic Management Journal, 33(1), 1–22.
Prencipe, A. (2000). Breadth and depth of technological capabilities in CoPS: The case of the aircraft engine control system. Research Policy, 29(7), 895–911.
Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. The Bell Journal of Economics, 8(1), 23–40.
Shenhar, A. (1994). Systems engineering management: A framework for the development of a multidisciplinary discipline. IEEE Transactions on Systems, Man, and Cybernetics, 24(2), 327–332.
Simon, H. A. (1996). The sciences of the artificial (3rd ed.). Cambridge, MA: MIT Press.
Sixt, E. (2014). Schwarmökonomie und Crowdfunding. Wiesbaden: Springer.
Sommer, S. C., Loch, C. H., & Dong, J. (2009). Managing complexity and unforeseeable uncertainty in startup companies: An empirical study. Organization Science, 20(1), 118–133.
Stuart, T. E., Hoang, H., & Hybels, R. C. (1999). Interorganizational endorsements and the performance of entrepreneurial ventures. Administrative Science Quarterly, 44(2), 315–349.
Stuart, T. E. (2000). Interorganizational alliances and the performance of firms: A study of growth and innovation rates in a high-technology industry. Strategic Management Journal, 21(8), 791–811.
Sudek, R. (2006). Angel investment criteria. Journal of Small Business Strategy, 17(2), 89–104.
Tu, Q., Vonderembse, M. A., Ragu-Nathan, T. S., & Ragu-Nathan, B. (2004). Measuring modularity-based manufacturing practices and their impact on mass customization capability: A customer-driven perspective. Decision Sciences, 35(2), 147–168.
Tversky, A., & Kahneman, D. (1975). Judgement under uncertainty: Heuristics and biases. In D. Wendt & C. Vlek (Eds.), Utility, probability, and human decision making (pp. 141–162). Dordrecht: Springer.
Van Osnabrugge, M., & Robinson, R. J. (2000). Angel investing: Matching startup funds with startup companies. San Francisco, CA: Jossey-Bass.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2018 Springer International Publishing AG
About this chapter
Cite this chapter
Tech, R.P.G. (2018). Framework: Matching Signals with Complexities of High-Tech Startups. In: Financing High-Tech Startups. Springer, Cham. https://doi.org/10.1007/978-3-319-66155-1_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-66155-1_6
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-66154-4
Online ISBN: 978-3-319-66155-1
eBook Packages: Business and ManagementBusiness and Management (R0)