A non-additive decision-aid for venture capitalists' investment decisions

The current study uses theory from the resource-based view of strategy to hypothesize that VCs use non-additive decision policies when making their investment decision. A policy capturing experiment finds that VCs do indeed use non-additive decision policies. Specifically, we find that interactions between leadership experience and other internal resources, and between leadership experience and environmental munificence, affect venture capitalists' decision-making. Although venture capitalists always prefer greater general experience in leadership, they value it more highly in large markets, when there are many competitors, and when the competitors are relatively weak. Previous start-up experience of the venture's management team may substitute for leadership experience. Building on these results, we tested a main-effects-only decision-aid and a decision-aid that included interaction terms (non-additive) and found that both outperformed VCs' own decisions.