Institutional Isomorphism in Venture Capital Investment Decision Making: Industry Characteristics and Investment Preferences

Abstract

This study uses an institutional frame to develop a test of isomorphic pressures that influence venture capital principals' investment behavior. Specifically, we hypothesize several linkages between specific industry-level characteristics and the isomorphic pressures that subsequently affect investment decision making in the venture capital industry with respect to those industries. The sample consists of 14,331 investment deals that occurred from 1992-2002, and a set of archival measures of industry task environment characteristics. The findings demonstrate that clear institutional isomorphic mechanisms are at work in the venture capital industry. Recommendations for future research and extensions of this study are developed.