Shaping the link: Venture capitalists’ investment portfolio and start-ups’ technological portfolio

We investigate how venture capitalists’ (VCs) investment portfolio strategy affects the way they exert influence on the diversity of start-ups’ technological portfolios. Drawing on the attention-based view (ABV), we argue that a VC’s investment portfolio strategy serves as a situational cue that determines its focus of attention on either the specialty or the flexibility of a start-up, thereby predicting its effort to encourage the start-up to reconfigure its technological portfolio. We test our conjectures with 1,023 firm-VC observations from China’s new energy domains, spanning the period from 2000 to 2019. Taking VCs’ equity share as a conduit through which influence is exerted on start-ups’ technological portfolios, our regression analysis shows that the greater the investment portfolio diversity, the stronger the negative relationship between VC equity share and the diversity of start-ups’ technological portfolios. We further show that as investment track depth increases, the negative relationship becomes stronger. Our study adds to our understanding of how VCs intervene in invested start-ups’ technological development and contributes to the portfolio management literature by linking VCs’ investment portfolios with start-ups’ technological portfolios.