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How does VC feedback affect start-ups?

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  • Harveen Chugh
  • Nicos Nicolaou
  • Simon Barnes

Abstract

This study examines how venture capital (VC) feedback affects start-ups through a three-year qualitative study of university spin-offs. We present a taxonomy of VC feedback into (i) inconsistent, (ii) consistent and workable, and (iii) consistent and unworkable feedback. We find that when start-ups fail to raise VC, inconsistent VC feedback leads to a greater escalation of commitment than consistent and workable VC feedback. We show that single-loop learning mediates the relationship between VC feedback and escalation of commitment. We find that consistent and unworkable VC feedback increases the likelihood of a firm's exit, and that inhibited double-loop learning mediates the relationship between VC feedback and an exit.

Suggested Citation

  • Harveen Chugh & Nicos Nicolaou & Simon Barnes, 2011. "How does VC feedback affect start-ups?," Venture Capital, Taylor & Francis Journals, vol. 13(3), pages 243-265, June.
    • Handle: RePEc:taf:veecee:v:13:y:2011:i:3:p:243-265
    DOI: 10.1080/13691066.2011.600285
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    Cited by:

    1. Konstantinos Pitsakis & Vangelis Souitaris & Nicos Nicolaou, 2015. "The Peripheral Halo Effect: Do Academic Spinoffs Influence Universities' Research Income?," Journal of Management Studies, Wiley Blackwell, vol. 52(3), pages 321-353, May.
    2. Stefan Marc Hossinger & Xiangyu Chen & Arndt Werner, 2020. "Drivers, barriers and success factors of academic spin-offs: a systematic literature review," Management Review Quarterly, Springer, vol. 70(1), pages 97-134, February.

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