Normative rationality in venture capital financing

We examine whether venture capitalists (VCs) make investments based on normative rationality, which is derived from habitual and embedded norms and traditions indicative of a macroculture. Syndication and social and professional relations facilitate the development of shared decision-making frameworks. Using a four step methodology and a unique dataset of 139VC decisions and 82 independent VC assessments of those decisions, we find that the VC industry exhibits collective investment decision-making preferences, reflecting normative rationality. We offer implications for theory, practice, and future research.

► The VC industry's investment decision-making preferences reflect normative rationality.
► VC decisions are embedded in norms and traditions and historical contexts.
► The VC industry is characterized by embedded syndicates and human capital transfers.
► Our dataset is 139VC decisions and 82 independent VC assessments of those decisions.
► The 4 research steps are free-listing, focus groups, expert evaluation, and statistical analysis.