The Impact of Institutional Settings on Learning Behavior by Venture Capitalists and Start-Ups

Our paper reports research from the emerging institutional field of venture capitalists in Europe. In Europe venture capitalism began to emerge about ten years ago, and thus, in Europe the phenomenon has the characteristics of emergence and novelty, as a local in-dustry venture capitalists have yet to develop distinctive characteristics. The European countries do not constitute a homogeneous institutional environment, but must be per-ceived as different local settings, and thus, venture capitalism may evolve into different forms in the various parts of Europe. The objective is to understand if and how differen-ces in local institutional settings affect learning and adaptation by European venture ca-pitalists and start-ups, and thus, affect the processes of field formation. For example, it has been observed that institutional settings can facilitate or discourage learning from direct experience (Herriot et al., 1985). Thus, depending on the institutional settings venture capitalists and start-ups may rely on diffusion of experience in various degrees. Experiences can diffuse from the US, where venture capitalism as an entrepreneurial form evolved in Silicon Valley in the 1970s. In the US venture capitalists represent an institutionalized type of organization with formalized rules and standards, codified be-havior and roles (Suchman, 1995; Suchman et al., 2001). European venture capitalists and start-ups may imitate behavior and rules developed in Silicon Valley, and thus, a second research objective is to understand if and how US venture capitalism affect the evolvement of venture capitalism in Europe. We study the emergence of a venture capitalist industry in Denmark and Italy, and thus, by selecting two countries with distinctive differences in cultures and institutions, we study learning and adaptation by venture capitalists and start-ups in different institutio-nal settings. We suggest that venture capitalists and start-ups perceiving institutional settings as non venture-friendly are more likely to rely on learning by imitation than on trial-and-error learning.