They just fade away: mortality in the US venture capital industry

Christopher I. Rider and Anand Swaminathan

Industrial and Corporate Change, 2012, vol. 21, issue 1, 151-185

Abstract: Organizational mortality events are better understood than the process by which organizations cease to be. Complementing research on organizing, we theorize about disorganizing. We propose that disorganizing organizations attempt to avoid mortality by reducing audience engagement. We also propose that, typically, such behaviors only delay the inevitable because reduced engagement diminishes audience appeal which, in turn, raises mortality hazards. Analyzing life histories of 1891 organizations that experience protracted mortality processes, we find support for our arguments. Reducing engagement increases the mortality hazard for venture capital firms by reducing the firm's appeal to co-investors, but gradual reductions attenuate the effects of reduced engagement on both mortality and appeal. We discuss implications of these findings for organizational theory, entrepreneurs, and institutional investors. Copyright 2012 The Author 2011. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Date: 2012
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