Using two complementary theoretical perspectives, we develop hypotheses regarding the determinants of the return required by venture capitalists and test them on a sample of over 200 venture capital companies (VCCs) located in five countries. Consistent with resource based theory, we find that early stage specialists require a significantly higher return than other VCCs when investing in later stage ventures. Consistent with financial theory, we find that acquisition /buyout specialists require a significantly lower return than other VCCs when investing in expansion companies. Furthermore, in comparison to specialists, highly stage-diversified VCCs require a significantly higher return for early stage investments. Independent VCCs require a higher rate of return than captive or public VCCs. In general, higher required returns are associated with VCCs providing more intensity of involvement, having shorter expected hold-ing period of the investment, and being located in the US or UK (in comparison to those in France, Belgium, and the Netherlands).
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Paper provided by Université de Bourgogne - Latec/Fargo (Research center in Finance,organizational ARchitecture and GOvernance) in its series Working Papers FARGO with number
1020701.
Length: 29 pages Date of creation: Jul 2002 Date of revision: Publication status: published in Journal of Business Venturing, vol.17, n°4, juillet 2002, p.291-312 Handle: RePEc:dij:wpfarg:1020701
Note: article publié dans Journal of Business Venturing, vol.17, n°4, juillet 2002, p.291-312 Contact details of provider: Postal: 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France Phone: +33(0)380395435 Fax: +33(0)380395488
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