Influence of venture capitalists on high tech management

The use of venture capital to finance high technology firms has increased dramatically in recent years. Venture capitalists often decide which high tech firms will receive financial backing; once financing is approved, they may exercise a great deal of influence on the firm's management. This study investigates the role of the venture capitalist in the management of the high tech firm. A body of literature on institutional power and organizational dependence is used as the theoretical framework for this research. Attention is directed toward the nature of venture capital influence, extent of influence, and factors moderating that influence. Results show that venture capitalists are deeply involved in establishing policies and monitoring managerial activities in high tech firms. The extent of influence is moderated by such factors as stage in the organizational life cycle, size of the venture capitalist, lead position of the venture capitalist, perceived firm performance, and background of entrepreneur.