A Matter of Salience? The Curvilinear Effect of Experience Heterogeneity on Firm Performance in the U.S. Venture Capital Market

Drawing on organisational learning research, this study proposes that in a given context, due to experience salience and organisational resistance to organisational adaption to new information, the impact of experience heterogeneity on firm performance is a U-shaped relationship: firms can benefit from either highly homogeneous or highly heterogeneous experiences but not from the moderate level of experience heterogeneity. Hypotheses are developed and tested using a large sample of US venture capital firms during 1995-2003. The U-shaped curvilinear relationship between experience heterogeneity and firm performance was found true for both a firm's own experiences and the experiences of the firm's network partners. The curvilinear effect of a firm's own experience heterogeneity was moderated by the firm's network status, while the effect of the firm's network partners' experience heterogeneity was moderated by the firm's structural holes in the network.