Research On Value Cognition And Evaluation Of New Technology-based Firms

Value cognition of new technology-based firms (NTBFs) is one of the most important activities for venture capitalists (VCs). The scholars have great interest in the cognitive criteria, but have not disclosed the process of value cognition from a psychological level yet, which leads to a kind of confusion between the input factors and affecting ones, and ignores the impact of the information on the value cognition. Based on cognitive psychology, strategic management literature, balanced scorecard, and the empirical literature results, this study proposes a value cognition model and a multi-stage evaluating model, tests them by multi-case research method, survey method and so on, and then explores the impact of information on the value cognition.In order to verify the value cognition model, and explore the impacts of information on the value cognition, this study inspects and verifies the hypothesis uses multi-case research method and survey method, collects many proofs included interviews, direct observation, participant observation, documents and archives, and surveys etc., which are collected through more than two years hard but fruitful field study.The main conclusions of this study are as follows:Firstly, both resources and performance have positive effects on the cognitive value of NTBFs. Under the same performance conditions, the better resources are, the higher cognitive value will be; while, under the same resources conditions, the better performance is, the higher cognitive value will be.Secondly, the value cognition of the venture capitalists is adjusted positively by the economic environment, the fit of NTBFs' strategy, the entrepreneurs' determination and motivation. And competitive position positively adjusts the value cognition of the venture capitalists positively; however the competition intensity does not affect cognitive value although the NTBFs in low-intensity competition industries have more attractions for the venture capitalists than in high-intensity competition industries.Thirdly, with the development of the NTBFs, the importance of resources over the performance (IROP) declines for both venture capitalists and technology entrepreneur, which is the result of the improvement of the availability of information about the performance of NTBFs. Because of the information asymmetry, there are significant difference in value cognition between the venture capitalists and technology entrepreneurs for NTBFs in the middle and later stages, but the difference is not significant for NTBFs in the early stages.Finally, the multi-stage evaluating model developed on the basis of the cognitive model is proved to have good consistency by use of 12 actual examples distributed in seeds stage, start-up stage, expansion stage and maturity stages equally. For each stage, there is only one NTBF been invested by venture capital firm. The venture capitalist who do the evaluation work is not aware of the 12 NTBFs. The best firms in the four stages chosen by the VC are just the ones which have been invested.This study is not only beneficial for VCs to more easily understand and improve their cognitive process and cognitive consistency, but also for entrepreneurs to find out VCs' cognitive criteria to prepare their business plans purposively and validly. It is undeniable that technology entrepreneurs have the responsibility to reduce the level of information asymmetry, so that venture capitalists can access to all kinds of NTBFs' information, thus enabling investment and financing activities more efficient.Other researchers can consider of testing the cognitive model through a bigger sample, and verify the consistency and the effectiveness of assessment model through the practical cases in the future. In addition, VCs can develop model to predict the future profitability of NTBFs on the basis of our value cognition model.