Does Competition Kill Ties?

Venture capital firms (VCs) form syndicates that compete to invest in deals. Does more competition makes it less likely that VCs will choose syndicate partners based on past ties? Using over 200,000 observations on how VCs choose each other in 572 biotech deals in Massachussetts from 1967 through 2004, I find the answer is: yes. The theory of embeddedness argues that past ties can explain the pattern of who works with who. I interpret my finding as a first step in demarcating when embeddedness might apply and when atomistic, calculative, economic forces might be a better explanation of who works with who.