Sarath Balachandran, Management, The Wharton School
Abstract: Strategic alliances with established enterprises are known to be a valuable resource for entrepreneurial firms to obtain access to knowledge and resources which support their growth. In this paper we examine how the networks of the venture capitalists (VCs) that back them influence startups’ access to these alliances. Though prior research has examined the effect of the status or prominence of VCs on various startup outcomes, there have been few studies that examine the composition of VCs co-investment networks in this context. We look specifically at the ties VCs possess with the investing arms of established firms as potential pathways of access to the established firm that could enhance the possibility of a strategic alliance between the startups in the VCs portfolio and the established firm. We also examine how the organizational structure of the established firm and the network structure within which the relevant ties are embedded influence this effect. The study has important implications for the way startups choose their sources of financing and therefore more broadly on the act of organizing for innovation.