Revisions in Fund Flows and Market Reputation Estimates within Venture Capital Markets

This study examines the extent to which reputation constructs proposed in NAH (Nahata 2008) or OBH (Obrimah 2016a) exhibit uniqueness properties expected to be characteristic of reputation constructs. Empirical results provide evidence of concave (non-unique) relations between reputation estimates generated by the NAH construct and realizations of VCs' prior portfolio performance. Contrary to results for the NAH construct, empirical findings provide evidence of convex (unique) relations between reputation estimates generated by the OBH construct and realizations of VCs' prior portfolio performance. In empirical tests of forecast power, while predicted future portfolio performance is convex in the OBH construct - resulting in forecasts that satisfy uniqueness properties - it is concave in the NAH construct. Combined, empirical findings demonstrate the OBH construct is the more robust of the two reputation constructs, as such the more reliable basis for investors' capital allocations to VCs. Confluence of study inferences indicate transitions in fund flows are of greater importance for understanding of evolution of venture capital markets than realizations of fund flows at any particular point in time