Abstract

In this paper, we extend information economics to the literature on R&D alliance partner selection by showing the different ways in which venture capitalists (VCs) shape entrepreneurial ventures’ partner selection decisions for R&D collaborations. Specifically, we advance the argument that affiliations with VCs can play a dual role in reducing the risk of adverse selection for R&D collaborations by conveying signals and mediating information about prospective partners. We also suggest that these benefits VC affiliations provide are contingent upon technological resource endowments of entrepreneurial ventures. In particular, we argue that the positive effects of affiliations with VCs will be more pronounced when firms have dissimilar technological resource endowments and therefore face greater challenges in understanding and evaluating each other’s resources. Furthermore, we argue that the signaling and information intermediation roles of VCs complement each other in reducing the risk of adverse selection.

THE STEVENS INSTITUTE OF TECHNOLOGY WESLEY J. HOWE AWARD FOR EXCELLENCE IN RESEARCH ON THE TOPIC OF CORPORATE ENTREPRENEURSHIP

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