Venture Capital Decision-making and the Cultures of Risk: an Application of Q Methodology to US and UK Innovation Clusters

TERRY L. BABCOCK-LUMISH
School of Geography and the Environment, Rothermere American Institute, University of Oxford, Oxford OX1 3TG, UK
This paper presents a comparative perspective on risk perception and decision-making
within United States (US) and United Kingdom (UK) entrepreneurial communities since
the bursting of the technology, media, and telecommunications (TMT) bubble in 2000.
Using an empirical approach drawn from political science literature, this paper relies upon
interviews and Q (rather than R) methodology to analyze the experiences and insights
of individuals throughout innovation investment communities, including entrepreneurs,
investment angels, venture capitalists, and institutional investors. This study sheds light
on post-boom behavioral trends and risk propensities, in relation to actors’ interrelated
decision-making processes. From decision-makers’ reported and ranked perceptions, factor
analysis in conjunction with additional contextual evidence was used to identify four influential
groups of individuals with shared approaches to early-stage innovation investment:
American-style managers, junior venture professionals, experienced angel investors, and
committed business builders. From this study of the social and economic geography of
American and British innovation communities, implications are drawn for understanding
the effectiveness of staged-funding networks in the innovation process and subsequently for
community and economic development. Furthermore, this analysis represents a foray into
application of Q methodology to the study of economic geography generally and innovation
clusters specifically.