Is a reputation for misconduct harmful? Evidence from corporate venture capital

This paper examines the effect of reputation on a corporate venture capital firm's ability to attract potential investments. We find that a reputation for experience, active involvement in the startup, and misconduct are all positively associated with the CVC ability to attract investments. An additional year of experience, a policy of taking seats on the boards of new ventures, and each additional lawsuit against the investors all bring at least one new venture to their portfolios. A reputation for misconduct does not deter startups when the CVC has a reputation for experience. However, when the CVC firm has a reputation for active engagement with its portfolio companies, every two additional lawsuits result in a loss of at least one investee. The results hold despite controlling for generalized favorability of the parent corporation. Our study suggests that finer grained measures are needed when studying the complex relationship between reputation and performance.