Abstract

Despite the high prevalence of VC syndication, there is still relatively little understanding of the dynamics of syndication relationships. In this paper, we examine whether and how investment outcomes affect the likelihood that syndicate partners will invest together again. Based on attribution and behavioral decision theories, we argue that syndicate partners draw inferences from their current investments about their ability to work together. On the whole, we expect that investment success will increase the likelihood of future co-investment, while failure will reduce this likelihood. But we also expect that the partners’ prior investment experience will make the success and failure of the current investment more salient and asymmetrically so; they matter only if they serve to affirm the partners’ perceptions of their competence or incompetence. Accordingly, we expect that current outcomes matter less when the partners have no prior experience. In addition, we expect that current success matters more in the context of prior success and less in the context of prior failure; similarly, current failure matters more in the context of prior failure and less in the context of prior success.

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