Effects of conformity on success of the firm:
The moderated effect of partner diversity on venture capital investments
Authors: Chun-Yun Cheng
Journal: Corporate Management Review. Dec. 2017, 37(2): 1-29.
Keywords: Conformity; partner diversity; venture capital investment; inter-organizational cooperation.
Abstract:
This study examines the determinants of success through the lens of behavioral conformity and partner attributes
beyond the firm’s boundaries. Using longitudinal investment data from 1980 to 2008 on venture capital (VC) in the U.S.,
we adopted logit models in a panel format with random effects. We find some evidence that investing with similar external
partners enhances investment performance. We also explore the crucial role partner diversity plays in moderating behavioral
conformity and success of the firm. Accessing divergent forms of external knowledge through inter-firm cooperation should
curb a firm’s tendency to engage in exaggerated fashionable compliance and improve the quality of organizations’ decision
making and subsequent success.