Frontiers of Entrepreneurship Research
1996 Edition


DO VENTURE CAPITALISTS REALLY UNDERSTAND
THEIR OWN DECISION PROCESS?:
A SOCIAL JUDGMENT THEORY PERSPECTIVE


Andrew L Zacharakis, Bentley College
G. Dale Meyer, University of Colorado, Boulder


Introduction

Venture Capitalist Decision Making

Social Judgment Theory

Figure 1: Lens Model

Methodology

Table 1: Experiment Treatment Variables

Results

Table 2: Comparison of Actual Decision Policy with Stated Decision Policy
Table 3: Median Variance Explained of Actual Decision by Actual Decision Policy (ADP) and Stated Decision Policy (SDP)
Table 4: VC Consistency of Applying Actual Decision Policy

Limitations

Conclusions

References


ABSTRACT

The Venture Capitalist (VC) decision process receives much attention within entrepreneurship literature. The majority of these studies rely on post hoc methodologies (i.e. interviews and surveys) to capture the VC decision process. Post hoc methods assume that VCs can accurately relate their own decision processes but studies from cognitive psychology suggest that people, in particular experts, are poor at introspecting. Introspection is subject to rationalization and post hoc recall biases. As such, past research may be biased. Using Social Judgment Theory and the associated lens model as a framework, the current study investigates how well VCs introspect about their own decision process. In general, it appears that VCs do not have a strong understanding of their investment decision process, especially when confronted with information rich decisions such as they face in making an investment decision.

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1997 Babson College All Rights Reserved
Last Updated 4/2/97 by Cheryl Ann Lopez

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