Problemistic Search of the Embedded Firm: The Joint Effects of Performance Feedback and Network Positions on Venture Capital Firms’ Risk Taking

Songcui Hu (), Qian (Cecilia) Gu () and Jun Xia ()
Additional contact information
Songcui Hu: Eller College of Management, University of Arizona, Tucson, Arizona 85721
Qian (Cecilia) Gu: J. Mack Robinson College of Business, Georgia State University, Atlanta, Georgia 30303
Jun Xia: Naveen Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080

Organization Science, 2022, vol. 33, issue 5, 1889-1908

Abstract: The Behavioral Theory of the Firm suggests that performance below aspirations triggers problemistic search that can lead to risk taking. This prediction has received empirical support from most studies on the topic. However, this literature has typically focused on the internal determinants of firm search and risk-taking behavior and given little attention to the influences of social networks in which firms are embedded. To this end, we incorporate the network embeddedness perspective regarding firms’ network positions and their roles in firm decision making. We suggest that a firm’s search behavior is jointly directed by its performance feedback and network positions. Specifically, network brokerage and centrality play important yet distinct roles in guiding firm search behavior by differentially shaping the direction of problemistic search: high brokerage directs problemistic search to high-risk solutions, whereas high centrality directs problemistic search to low-risk solutions. Our theoretical predictions receive general empirical support based on analyses using longitudinal data from the Chinese venture capital industry. Our approach incorporates the crucial role of network structures into the problemistic search model and works toward building a problemistic search theory of the embedded firm.

Keywords: problemistic search; brokerage; centrality; risk taking; search direction; stage choice; venture capital firms; China (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/orsc.2021.1513 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:33:y:2022:i:5:p:1889-1908

Access Statistics for this article

More articles in Organization Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().