Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2016
  • Article
  • Academy of Management Best Paper Proceedings

Organizational Decision-Making and Information: Angel Investments by Venture Capital Partners

By: Andy Wu
  • Format:Print
ShareBar

Abstract

We study information aggregation in organizational decision-making for the financing of entrepreneurial ventures. We introduce a formal model of voting where agents face costly tacit information to improve their decision quality. Equilibrium outcomes suggest a theoretical tension for group decision-making between the benefits of information aggregation and a cost from the participation of uninformed agents, and this tension presents a boundary condition for when a group decision is superior to an individual decision. We test the implications of the model for a particular phenomenon in venture capital: private angel investments by the partners outside of their employer, which represent investments passed on by the employer. Venture capital partners, acting independently with their personal funds, make investments into younger firms with less educated and younger founding teams than their employing VC firms, but these investments perform financially similarly or better on some metrics even when controlling for investment size, stage, and industry. Geographic distance and technological inexperience by the VC increase the probability the investment is taken up by a partner and not the VC. This work contributes to an emerging stream of literature on information aggregation in organizations and the established literatures on resource allocation and incumbent spin-outs.

Keywords

Entrepreneurial Finance; Angel Investors; Organization Design; Voting; Group Decision-making; Information; Strategy; Organizations; Entrepreneurship; Decision Making; Financing and Loans

Citation

Wu, Andy. "Organizational Decision-Making and Information: Angel Investments by Venture Capital Partners." Academy of Management Best Paper Proceedings (2016): 189–194.
  • Find it at Harvard
  • Read Now

About The Author

Andy Wu

Strategy
→More Publications

More from the Author

    • January 2023
    • Faculty Research

    Network Effects in Technology

    By: Andy Wu and Matt Higgins
    • November 2022
    • Faculty Research

    HTC and Virtual Reality (B)

    By: Andy Wu and Matt Higgins
    • September 2022
    • Faculty Research

    Applied Intuition: Powering Autonomy at Scale

    By: Andy Wu and Matt Higgins
More from the Author
  • Network Effects in Technology By: Andy Wu and Matt Higgins
  • HTC and Virtual Reality (B) By: Andy Wu and Matt Higgins
  • Applied Intuition: Powering Autonomy at Scale By: Andy Wu and Matt Higgins
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College