Advanced Search
MyIDEAS: Login to save this article or follow this journal

Explaining returns on venture capital backed companies: Evidence from Belgium

Contents:

Author Info

  • Alperovych, Yan
  • Hübner, Georges

Abstract

Using a unique database of 990 VC-backed Belgian firms, we study whether compatibility between corporate and environmental characteristics matters. We address two questions: (i) Does the interplay of company, industry, and product factors affect the expected returns of the VC-backed firms? (ii) Does the joint compatibility between these factors results in a non-linear increase in performance? Panel data analysis shows a significant influence of factor compatibility on returns. Quantile regression analysis indicates a non-linear relationship between the return and its determinants. Conjoint analysis identifies certain combinations of factors, which collapse into classifiable patterns described in the strategic management literature.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0275531911000109
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 25 (2011)
Issue (Month): 3 (September)
Pages: 277-295

as in new window
Handle: RePEc:eee:riibaf:v:25:y:2011:i:3:p:277-295

Contact details of provider:
Web page: http://www.elsevier.com/locate/ribaf

Related research

Keywords: Venture capital Return Strategy Entrepreneurship Life cycle Compatibility;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Salim Chahine & Igor Filatotchev & Mike Wright, 2007. "Venture Capitalists, Business Angels, and Performance of Entrepreneurial IPOs in the UK and France," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3-4), pages 505-528.
  2. Rajshree Agarwal & Barry L. Bayus, 2002. "The Market Evolution and Sales Takeoff of Product Innovations," Management Science, INFORMS, vol. 48(8), pages 1024-1041, August.
  3. Macmillan, Ian C. & Zemann, Lauriann & Subbanarasimha, P. N., 1987. "Criteria distinguishing successful from unsuccessful ventures in the venture screening process," Journal of Business Venturing, Elsevier, vol. 2(2), pages 123-137.
  4. Kerins, Frank & Smith, Janet Kiholm & Smith, Richard, 2004. "Opportunity Cost of Capital for Venture Capital Investors and Entrepreneurs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(02), pages 385-405, June.
  5. Cochrane, John H., 2005. "The risk and return of venture capital," Journal of Financial Economics, Elsevier, vol. 75(1), pages 3-52, January.
  6. Hellmann, Thomas F. & Puri, Manju, 2000. "Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence," Research Papers 1661, Stanford University, Graduate School of Business.
  7. Koberg, Christine S. & Uhlenbruck, Nikolaus & Sarason, Yolanda, 1996. "Facilitators of organizational innovation: The role of life-cycle stage," Journal of Business Venturing, Elsevier, vol. 11(2), pages 133-149, March.
  8. Mike Wright, 1998. "Venture Capital and Private Equity: A Review and Synthesis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 521-570.
  9. Utterback, James M. & Suarez, Fernando F., 1993. "Innovation, competition, and industry structure," Research Policy, Elsevier, vol. 22(1), pages 1-21, February.
  10. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-47, April.
  11. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  12. Tom Vanacker & Sophie Manigart, 2010. "Pecking order and debt capacity considerations for high-growth companies seeking financing," Small Business Economics, Springer, vol. 35(1), pages 53-69, July.
  13. Danny Miller & Peter H. Friesen, 1984. "A Longitudinal Study of the Corporate Life Cycle," Management Science, INFORMS, vol. 30(10), pages 1161-1183, October.
  14. Manuel Landajo & Javier de Andrés & Pedro Lorca, 2008. "Measuring firm performance by using linear and non-parametric quantile regressions," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 57(2), pages 227-250.
  15. Muzyka, Dan & Birley, Sue & Leleux, Benoit, 1996. "Trade-offs in the investment decisons of European venture capitalists," Journal of Business Venturing, Elsevier, vol. 11(4), pages 273-287, July.
  16. Macmillan, Ian C. & Siegel, Robin & Narasimha, P. N. Subba, 1985. "Criteria used by venture capitalists to evaluate new venture proposals," Journal of Business Venturing, Elsevier, vol. 1(1), pages 119-128.
  17. William E. Cox & Jr., 1967. "Product Life Cycles as Marketing Models," The Journal of Business, University of Chicago Press, vol. 40, pages 375.
  18. Giulio Bottazzi & Angelo Secchi & Federico Tamagni, 2006. "Productivity, Profitability and Financial Fragility: Evidence from Italian Business Firms," LEM Papers Series 2006/08, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  19. Giot, Pierre & Schwienbacher, Armin, 2007. "IPOs, trade sales and liquidations: Modelling venture capital exits using survival analysis," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 679-702, March.
  20. Agarwal, Rajshree & Audretsch, David B, 2001. "Does Entry Size Matter? The Impact of the Life Cycle and Technology on Firm Survival," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 21-43, March.
  21. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  22. Casson, Peter D. & Martin, Roderick & Nisar, Tahir M., 2008. "The financing decisions of innovative firms," Research in International Business and Finance, Elsevier, vol. 22(2), pages 208-221, June.
  23. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-84.
  24. Klepper, Steven, 1997. "Industry Life Cycles," Industrial and Corporate Change, Oxford University Press, vol. 6(1), pages 145-81.
  25. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  26. Kaplan, Steven & Strömberg, Per Johan, 2002. "Characteristics, Contracts and Actions: Evidence from Venture Capitalist Analyses," CEPR Discussion Papers 3243, C.E.P.R. Discussion Papers.
  27. Gompers, Paul & Lerner, Josh, 2000. "Money chasing deals? The impact of fund inflows on private equity valuation," Journal of Financial Economics, Elsevier, vol. 55(2), pages 281-325, February.
  28. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521608275.
  29. Miller, Alex & Gartner, William B. & Wilson, Robert, 1989. "Entry order, market share, and competitive advantage: A study of their relationships in new corporate ventures," Journal of Business Venturing, Elsevier, vol. 4(3), pages 197-209, May.
  30. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  31. Agarwal, Rajshree & Bayus, Barry L., 2002. "The Market Evolution and Sales Take-Off of Product Innovations," Working Papers 02-0104, University of Illinois at Urbana-Champaign, College of Business.
  32. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
  33. Gorman, Michael & Sahlman, William A., 1989. "What do venture capitalists do?," Journal of Business Venturing, Elsevier, vol. 4(4), pages 231-248, July.
  34. Filson, Darren, 2002. "Product and process innovations in the life cycle of an industry," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 97-112, September.
  35. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
  36. Bottazzi, Laura & Da Rin, Marco & Hellmann, Thomas, 2008. "Who are the active investors?: Evidence from venture capital," Journal of Financial Economics, Elsevier, vol. 89(3), pages 488-512, September.
  37. Cumming, Douglas & Fleming, Grant & Suchard, Jo-Ann, 2005. "Venture capitalist value-added activities, fundraising and drawdowns," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 295-331, February.
  38. John Goddard & Manouche Tavakoli & John Wilson, 2005. "Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1269-1282.
  39. Mason, Colin M. & Harrison, Richard T., 2002. "Is it worth it? The rates of return from informal venture capital investments," Journal of Business Venturing, Elsevier, vol. 17(3), pages 211-236, May.
  40. Klepper, Steven & Simons, Kenneth L., 2005. "Industry shakeouts and technological change," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 23-43, February.
  41. Marnik G. Dekimpe & Dominique M. Hanssens, 1995. "Empirical Generalizations About Market Evolution and Stationarity," Marketing Science, INFORMS, vol. 14(3_supplem), pages G109-G121.
  42. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
  43. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  44. Joerg Freiling, 2004. "A Competence-based Theory of the Firm," management revue. Socio-economic Studies, Rainer Hampp Verlag, vol. 15(1), pages 27-52.
  45. Sapienza, Harry J. & Manigart, Sophie & Vermeir, Wim, 1996. "Venture capitalist governance and value added in four countries," Journal of Business Venturing, Elsevier, vol. 11(6), pages 439-469, November.
  46. Boyan Jovanovic & Balàzs Szentes, 2007. "On the Return to Venture Capital," NBER Working Papers 12874, National Bureau of Economic Research, Inc.
  47. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  48. Steven N. Kaplan & Antoinette Schoar, 2005. "Private Equity Performance: Returns, Persistence, and Capital Flows," Journal of Finance, American Finance Association, vol. 60(4), pages 1791-1823, 08.
  49. Levesque, Moren & Shepherd, Dean A., 2004. "Entrepreneurs' choice of entry strategy in emerging and developed markets," Journal of Business Venturing, Elsevier, vol. 19(1), pages 29-54, January.
  50. Macmillan, Ian C. & Kulow, David M. & Khoylian, Roubina, 1989. "Venture capitalists' involvement in their investments: Extent and performance," Journal of Business Venturing, Elsevier, vol. 4(1), pages 27-47, January.
  51. Hand, John R.M., 2007. "Determinants of the round-to-round returns to pre-IPO venture capital investments in U.S. biotechnology companies," Journal of Business Venturing, Elsevier, vol. 22(1), pages 1-28, January.
  52. Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
  53. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January.
  54. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
  55. Tobias J. Moskowitz & Annette Vissing-Jorgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," NBER Working Papers 8876, National Bureau of Economic Research, Inc.
  56. Davila, Antonio & Foster, George & Gupta, Mahendra, 2003. "Venture capital financing and the growth of startup firms," Journal of Business Venturing, Elsevier, vol. 18(6), pages 689-708, November.
  57. Swan, John E. & Rink, David R., 1982. "Fitting market strategy to varying product life cycles," Business Horizons, Elsevier, vol. 25(1), pages 72-76.
  58. Zahra, Shaker A., 1996. "Technology strategy and financial performance: Examining the moderating role of the firm's competitive environment," Journal of Business Venturing, Elsevier, vol. 11(3), pages 189-219, May.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:25:y:2011:i:3:p:277-295. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.