Effective Business Model Change in Entrepreneurial Ventures: the Roles of Venture Capital Firms and New Managers Additions

Drawing on learning theory and attention-based view of the firm, we examine the impact of venture capital firms (VCFs) on the performance of ventures that have gone through a business model change. Based on unique survey data on 156. venture capital backed portfolio companies (PFCs) financed by French VCFs, we find a curvilinear relationship between VCFs' investment focus on business model change and PFC performance such that up to a certain point increases in investment focus enhance PFC performance, and beyond that point further increases in investment focus reduce PFC performance. Further, the addition of new managers not only increases PFC performance, but also moderates the curvilinear relationship between VCF investment focus on business model change and PFC performance. These results have important implications for theory and practice.