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Working Paper | 2015

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

by Andy Wu

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Language: English Format: Print Read Now

Citation:

Wu, Andy. "Organizational Decision-Making and Information: Angel Investments by Venture Capital Partners." Working Paper, November 2015.

Related Work

  1. Article | Academy of Management Best Paper Proceedings | 2016

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

    Andy Wu

    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: 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.  View Details
    CiteView DetailsFind at Harvard Read Now Related

About the Author

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Andy Wu
Assistant Professor of Business Administration
Strategy

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More from the Author

  • Case | HBS Case Collection | November 2019

    Microsoft Azure and the Cloud Wars

    Andy Wu and Cindy Na

    Citation:

    Wu, Andy, and Cindy Na. "Microsoft Azure and the Cloud Wars." Harvard Business School Case 720-409, November 2019.  View Details
    CiteView DetailsEducators Related
  • Case | HBS Case Collection | October 2019 (Revised October 2019)

    Epic Games

    Andy Wu and Christopher Zhang

    Epic Games entered a stagnant market with its PC-games digital storefront in 2018, in the context of incumbent competitors such as Steam, its meteoric rise via Fortnite, and imminent industry shifts in gaming distribution. On the surface, Epic Games Store’s competitive advantage was its revenue-sharing policy that was more generous to developers. Early successes revealed Epic Games’ potential as a new distribution platform. After serving two sides of a market exceptionally well – game developers through Unreal Engine and individual users through hit-games such as Fortnite – could Epic Games become a PC-games distribution platform in the rapidly-changing video games industry?

    Keywords: industry analysis; Video Games; platforms; Comparative Advantage; growth strategy; innovation focused strategy; Pricing strategy; Strategy; Competition; Growth and Development Strategy; Innovation Strategy; Games, Gaming, and Gambling; Technology Industry;

    Citation:

    Wu, Andy, and Christopher Zhang. "Epic Games." Harvard Business School Case 720-380, October 2019. (Revised October 2019.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Background Note | HBS Case Collection | October 2019

    Evolution of the Drone Industry

    Rory McDonald, Andy Wu, Emilie Billaud and Ryan Bayer

    This note focuses on the development of the drone industry in recent years and provides insights on the drone technology, regulations, applications, market size, top players, and ecosystem. This note was written in conjunction with the case study “Parrot: Navigating the Nascent Drone Industry” (HBS No. 619-085).

    Keywords: drones; Technology; Disruption; Strategy; Entrepreneurship; Engineering; Product Development; Technology Industry; Asia; Europe; North America; United States;

    Citation:

    McDonald, Rory, Andy Wu, Emilie Billaud, and Ryan Bayer. "Evolution of the Drone Industry." Harvard Business School Background Note 620-053, October 2019.  View Details
    CiteView DetailsEducators Related
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