Beyond Formal Institutions: Status Order as Informal Governance in Venture Capital Networks

• In Event: Recent Advances in Social Network Analysis

Abstract

Why do some countries sustain high levels of venture capital investment despite weak formal institutions, while others fail to do so even under favorable institutional conditions? Prior research emphasizes formal institutions or integrated networks as governance mechanisms but overlooks how system-level network architectures organize coordination under institutional variation. We theorize status order, the joint presence of status inequality and status homophily, as a form of informal governance embedded in venture capital networks. Adopting a configurational perspective, we analyze how combinations of institutional and network conditions shape venture capital investment across countries. Using fuzzy-set qualitative comparative analysis (fsQCA) on data from 87 national venture capital systems, we identify multiple equifinal pathways leading to high and low investment levels. Our findings show that formal institutions are neither necessary nor sufficient for venture capital activity. Instead, coordination emerges through configurations in which status-ordered networks, together with distinct forms of network integration, substitute for or complement formal institutions by structuring authority and access.

Authors

• Charles Kirschbaum, Insper

• Andrea Minardi

• Bruno Gruner

• Marcelo Guzella