Exchange Status, Ability Status, and Reputation within Venture Capital Markets

Conventional implementations of the Bonacich (1987) status construct are derived from economic agents' `information reach' and `frequency of repeated partnerships'. This study finds status that derives from new entrant venture capitalists' (VCs') information reach and frequency of repeated partnerships (exchange status) does not have any forecast power for future realizations of market reputations or future realizations of its own construct within venture capital markets. In presence of attainment to high reputation, low exchange status does not convey any economic tradeoffs, merely is evidence that reputation was attained to uniquely, that is, attained to without much participation in syndicated venture capital financing deals. In empirical tests that substitute estimates of intrinsic ability for `frequency of repeated partnerships' in implementation of the Bonacich (1987) construct, the resulting hybrid variable, ability status is shown to have forecast power for future realizations of market reputations, and future realizations of exchange status. Empirical findings reject exchange status and recommend either of the ability status or analogous `reputation status' constructs as robust proxies for status within venture capital markets. Empirical findings indicate VCs can improve optimality of syndicate sizes that obtain in context of financing of innovative projects