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Product market competition, venture capital, and the success of entrepreneurial firms

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  • Cumming, Douglas J.
  • Nguyen, Giang
  • Nguyen, My

Abstract

We document a positive effect of product market competition (PMC) on venture capital (VC) staging. Employing large tariff rate reductions as an exogenous shock to PMC, we find that large tariff reductions lead to a greater likelihood of staged financing and a larger number of financing rounds. Cross-sectional analyses reveal that the effect is stronger for entrepreneurial firms that are younger, operate in high-tech and manufacturing industries, or receive investments from less reputable and inexperienced VCs. Our findings are consistent with the notion that by mitigating business uncertainty and survival risk, VC staging acts as a complement to PMC for enhancing entrepreneurial firms’ success.

Suggested Citation

  • Cumming, Douglas J. & Nguyen, Giang & Nguyen, My, 2022. "Product market competition, venture capital, and the success of entrepreneurial firms," Journal of Banking & Finance, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:jbfina:v:144:y:2022:i:c:s0378426622001571
    DOI: 10.1016/j.jbankfin.2022.106561
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    More about this item

    Keywords

    Product market competition; Monitoring; Venture capital staging; Success;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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