Nascent ventures competing for start-up capital: Matching reputations and investors

Abstract

Although nascent ventures have not yet developed a performance-based reputation, the individual reputations of their founders, based on the performance of their earlier ventures, can function as important signals to investors. Selection system theory distinguishes between different types of reputations as well as different types of investors, in order to analyze how particular types of reputations affect the investment behavior of particular types of investors. The empirical setting of this paper is the Dutch film industry, in which we study the impact of different types of reputations of producers and directors on the investment decisions of the three main investors.