Publications
Publications
- June 2008
- Administrative Science Quarterly
Bringing the Context Back In: Settings and the Search for Syndicate Partners in Venture Capital Investment Networks
By: Toby E. Stuart
Abstract
Most existing network-based theories of relationship formation, whether based on homophily or structural constraint, imply that actors form highly cohesive, homogenous clusters. Yet real networks also include many "bridging" ties—isolated links between parties that vary on one or more social dimensions. To explain the formation of bridging ties, we propose a theory of relationship formation based on the characteristics of "settings," or the places and times where actors meet. We argue that bridging relations form when organizations participate in two types of settings: unusually popular or fashionable ones, and those with limited partner risk. In an empirical exploration of our thesis in the formation of syndicate relations between venture capital firms, we find that the likelihood that bridging ties form between VCs increases with several attributes of the target company investment "setting": (1) the recent popularity of investing in the target firm's industry and home region, (2) the size of the investment syndicate, (3) target company maturity, and (4) the density of relationships among the other members of the syndicate.
Keywords
Venture Capital; Networks; Theory; Partners and Partnerships; Investment; Risk and Uncertainty; Business Growth and Maturation; Size; Geographic Location
Citation
Sorenson, Olav, and Toby E. Stuart. "Bringing the Context Back In: Settings and the Search for Syndicate Partners in Venture Capital Investment Networks." Administrative Science Quarterly 53, no. 2 (June 2008).
About The Author
