Document Type
Article
Publication Date
10-30-2024
Abstract
Drawing on entrepreneurial financing literature, we investigate how venture capital (VC) firms' investment horizons affect their ventures' product quality problems. We argue that when a VC firm has a short investment horizon, it may guide its portfolio companies to develop new products fast to increase the likelihood of successful exits. However, this deliberate effort may act as a double-edged sword for ventures. That is, VC firms' guidance on product commercialization could inadvertently expose ventures to product quality problems. Building on this notion, we suggest that ventures backed by VC firms with short investment horizons may experience more product quality problems than those backed by VC firms with long investment horizons. We further suggest that the effect of a VC firm's investment horizon on product quality problems is mitigated when the venture is invested by corporate VC investors but amplified when the venture develops complex products. We test our hypotheses using a dataset on product recalls of VC-backed ventures in the U.S. medical device industry.
Recommended Citation
Shin, M., Bae J., & Ozmel, U. 2025. Effect of venture capital investment horizon on new product development: Evidence from the medical device sector. Journal of Business Venturing, 40(1): 106454. https://doi.org/10.1016/j.jbusvent.2024.106454
Peer Reviewed
1
Copyright
Elsevier
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Included in
Entrepreneurial and Small Business Operations Commons, Finance and Financial Management Commons
Comments
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Business Venturing. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Business Venturing, volume 40, issue 1, in 2025. https://doi.org/10.1016/j.jbusvent.2024.106454
The Creative Commons license below applies only to this version of the article.