This study examines how fluctuations in the amount of capital flowing into venture funds affect the financing of innovative startup companies and how economic downturns affect such financing. We argue that the nature of the economic downturn can cause differential effects on the investment pattern. We find that venture capital firms invest more in early-stage companies than in later-stage companies when the amount of capital flowing into the market increases. We also find that venture capital firms invest less in early-stage companies than in later-stage companies during an economic downturn associated with the real sector, and that they invest more in early-stage companies than in later-stage companies during an economic downturn associated with the financial sector. This study contributes to the entrepreneurship literature by demonstrating how macroeconomic factors affect venture capital investment decisions. The study also delineates the implications of seeking market entry via venture capital financing by entrepreneurial companies.

http://onlinelibrary.wiley.com/doi/10.1002/mde.2646/abstract

Woo, H. (2019) “The effect of CEO compensation structure on the early internationalization of newly public firms" The International Journal of Human Resource Management

This study suggests the incentive perspective as an antecedent of early internationalization. We argue that early internationalization is a risky strategy for a CEO in a relatively young firm and that a potential agency problem arises between a CEO and shareholders in such a context. By drawing on agency theory, we theorize that the CEO compensation structure plays a critical role in the early internationalization decision. In a sample of 145 newly public U.S. firms, we find that the likelihood of early internationalization is negatively associated with the CEO’s secured cash pay and positively associated with the CEO’s equity-based compensation. In addition, we find that the positive association between equity-based compensation and the likelihood of early internationalization becomes stronger as the CEO’s tenure increases. These findings show that the interest alignment between a CEO and shareholders affects the strategic decision of early internationalization. Our study contributes to the literature on corporate governance and international business by underscoring the importance of the compensation structure as a significant driver of value-creating strategic initiatives and by identifying incentive factors that spur firms to internationalize early.

https://www.tandfonline.com/doi/full/10.1080/09585192.2017.1296016

Paik, Y., and Woo, H., (2017) “The Effects of Corporate Venture Capital, Founder Incumbency, and Their Interaction on Entrepreneurial Firms’ R&D Investment Strategy" Organization Science

Corporate venture capital (CVC) investment has increasingly become an important source of entrepreneurial finance. Accordingly, while scholars have traditionally focused on understanding the main motivations behind CVC activity and its impact on the investing corporate firm, more recently, scholars have also started to emphasize the importance of understanding the impact of CVC investment on the investee venture. In particular, these recent studies commonly show that CVC investment has a positive effect on the venture’s innovation. While the positive link between CVC investment and the venture’s innovation output is well established in the literature, the organizational mechanisms through which this relationship unfolds within the venture remain relatively underexplored. In this study, we fill this gap in the literature by examining the effects of CVC ownership, founder incumbency, and the CVC-founder interaction on R&D investment strategies in VC-financed, technology-based entrepreneurial ventures. In doing so, we aim to provide a novel explanation of the organizational mechanisms that lead to greater investment in R&D, especially with regard to the interaction between CVC investors and founder managers. We argue that CVC ownership and founder incumbency positively affect entrepreneurial firms’ R&D investment and, more importantly, that the CVC ownership effect is effectively amplified when the founder is an incumbent top manager because of goal congruence and knowledge spillover from the CVC firm. Our empirical analysis supports our hypotheses while addressing potential endogeneity concerns. Our results also support various mechanisms by utilizing the data on CVC board membership, CVC investor heterogeneity, the founder’s technological background, and the investee venture’s industry.

http://pubsonline.informs.org/doi/abs/10.1287/orsc.2017.1133

Woo, H. (2019) “New CEOs' previous experience and acquisition performance" International Journal of Organizational Analysis

This study investigates how new CEOs’ previous experiences in other organizations and other industries create value in acquisitions. Drawing on the upper echelon perspective, I theorize that the multiorganizational experience of new CEOs is positively associated with acquisition performance and, in particular, that the multi-industry experience of new CEOs leads to better performance in diversifying acquisitions than in related acquisitions. While new CEOs without multiorganizational experience undergo a cognitive entrenchment in firm-specific experience, new CEOs with multiorganizational experience can lead acquisitions with more flexibility and agility. From the data on acquisitions in the US manufacturing industries announced between 2008 and 2010, I find evidence supporting the hypotheses. This paper contributes to the CEO literature and acquisition literature by suggesting that the multiorganizational experience of new CEOs can be a valuable source of competitive advantages, particularly when implementing corporate strategies involving interorganizational integration processes.

https://www.emeraldinsight.com/doi/full/10.1108/IJOA-03-2018-1389

Woo, H. and Grandy, J. (2019) “Nikola Motors: a Case Study in Bundling as a Market Entry Strategy" Journal of Business Strategy

By introducing how a young entrepreneurial firm leverages bundling as a market entry strategy, this study suggests a way that a relatively vulnerable start-up can secure its position from a threat of resource-rich established competitors. The authors conducted a qualitative investigation into Nikola Motors, a class 8 heavy-duty truck manufacturer based in Phoenix, Arizona. The analysis revealed the underlying mechanisms that allow a start-up to effectively enter a market through bundling in the truck manufacturing industry. Nikola Motors Co. uses a bundled business model in commercializing hydrogen-power technology used for heavy-duty truck manufacturing. Instead of focusing on a single product, Nikola’s business model created an ecosystem surrounding hydrogen fuel-cell electric heavy trucks, including hydrogen fueling stations, maintenance service and leasing. By leveraging partnership with players in other areas, it overcomes the resource limitation as a relatively small firm. Start-ups seeking to disrupt markets with novel technologies risk losing their competitive advantage to imitation by more resource-rich established firms. This study examines a novel approach to a bundled business model that can be effective for relatively resource-poor new companies. It suggests practical implications on how firms which are relatively in a weak position compete with established incumbents.

https://doi.org/10.1108/JBS-07-2019-0145

Woo, H. (2020) “Foreign Venture Capital Firms and Internationalization of Ventures " Multinational Business Review

This study examines how foreign venture capital firms affect the internationalization of investee ventures and their performance. We argue that, as influential stakeholders, foreign VC firms engage in strategic decisions of investee ventures and may positively contribute to ventures’ business in foreign markets. The study examines 551 VC-backed ventures that went public between 2000 and 2014 in the U.S. Logistic regressions and generalized linear models are used to test hypotheses and the two-stage approach is used to address a potential endogeneity issue. In our empirical results, we find that foreign venture capital investment is positively associated with the internationalization of ventures in terms of both the likelihood of internationalization and foreign sales intensity. In addition, we find that internationalization and foreign sales intensity is positively associated with firm performance when a venture is backed by a foreign venture capital firm. This study makes important theoretical and empirical contributions to the international entrepreneurship literature by highlighting the role of foreign VC investors on internationalization of ventures.

https://www.emerald.com/insight/content/doi/10.1108/MBR-09-2019-0104/full/html