Swimming with sharks in Europe: When are they dangerous and what can new ventures do to defend themselves?

Research summary: This study replicates Dushnitsky and Shaver (2009) in an institutional setting different from the United States, that is, the European venture capital market. We highlight the role played by this switch of boundary condition in influencing how legal defenses protect new ventures' knowledge from misappropriation and encourage the formation of ties between these ventures and same-industry corporate venture capitalists. Furthermore, we consider timing and social defenses and their interactions with legal defenses in Europe. Our results indicate that the use of legal and other defenses by new ventures does vary, depending on the characteristics of the institutional context. Managerial summary: In this study, we focus attention on the formation of corporate venture capital (CVC) ties in Europe. We highlight that the institutional context of the European venture capital market differs from the one in the United States, and this difference influences how legal defenses protect new ventures' knowledge from misappropriation and encourage the formation of ties between these ventures and same-industry CVCs. We also consider the protection offered to new ventures by postponing CVC ties to later stages and by affiliation with prominent independent VCs. We show that, in Europe, these protections are less effective than in the United States. However, the protection provided by legal defenses is reinforced when new ventures are affiliated with prominent independent VCs. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]