When Knowing and Learning Meet: How Internal Expertise and External Ties Boost Venture Success

What is it about?

This study explores how venture capital firms use both internal knowledge and external partnerships to improve their investment performance. The authors investigate how a firm’s own expertise in certain industries, combined with its ability to collaborate with other investment partners, contributes to more successful outcomes. The focus is on how these two strategies—developing knowledge internally and accessing it externally—interact to shape performance in a dynamic, knowledge-intensive field like venture capital. Using longitudinal data from 200 US venture capital firms, the study shows that both internal and external knowledge use enhance performance. Firms do better when investing in industries where they have strong expertise and when partnering through syndicated investments, especially with familiar collaborators. External knowledge is most valuable when firms enter industries outside their core experience, as working with trusted partners helps bridge knowledge gaps and reduce risk in unfamiliar domains. For practitioners, these findings highlight that balancing internal learning with external collaboration is key to sustained success. Venture capital firms should continue deepening their own industry-specific capabilities while strategically leveraging partnerships to fill knowledge voids. Repeated collaborations can help firms manage uncertainty, exchange insights efficiently, and strengthen their competitive advantage.

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Photo by Vitaly Gariev on Unsplash

Photo by Vitaly Gariev on Unsplash

Why is it important?

This research advances understanding of how different knowledge strategies complement one another in organizational performance. It shows that relying solely on internal expertise or external alliances is insufficient—superior outcomes emerge from the interaction between knowing and learning across boundaries. The study is timely because it speaks to broader challenges faced by knowledge-driven organizations in today’s innovation economy. It demonstrates how firms can convert both experience and collaboration into performance gains, offering valuable lessons for any organization seeking to thrive in complex, information-rich environments.