Should business angels diversify their investment portfolios to achieve higher performance? The role of knowledge access through co-investment networks.
Journal
Journal of Business Venturing
Type
journal article
Date Issued
2020-09-05
Author(s)
Abstract
This paper investigates the performance effects of business angel portfolio industry diversification. Using a unique bi-annual panel dataset of 142 members of a professional angel investment platform and their portfolio returns between 2013 and 2017, we consider the costs and benefits of diversifying investments into various industries. Drawing upon theoretical arguments about distant search, we theorize and find a nonlinear (S-shaped) relationship between portfolio industry diversification and performance. Further, we pay specific attention to a proposed overdiversification effect that takes place at high levels of portfolio industry diversification and show that this effect is moderated by individuals' access to industry knowledge through their co-investment networks. For business angels who have a central position within a diverse network of industry specialists, the overdiversification effect is less pronounced.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Pages
19
Subject(s)
Eprints ID
261137
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Name
Should business angels diversify their investment portfolios.pdf
Size
1.02 MB
Format
Adobe PDF
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