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Is Venture Capital a regional business? – The role of syndication

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Author Info
Michael Fritsch
Dirk Schilder

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Abstract

We investigate whether the supply of Venture Capital (VC) in Germany is driven by spatial influences. The study is based on information from more than 300 VC investments made in Germany between 2004 and 2005. We find evidence that the geographical distance between a VC company and the portfolio firm is not an important factor for German VC investments. Syndication of investments helps to overcome the problem of distance to portfolio firms if one of the investors is located close to the investment. Altogether, we find no evidence for a severe regional equity gap for young and innovative companies in Germany.

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Publisher Info
Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2006-25.

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Length: 26 pages
Date of creation: Oct 2006
Date of revision:
Handle: RePEc:esi:egpdis:2006-25

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Related research
Keywords: Venture Capital; regional equity gap; start-up financing;

Other versions of this item:

Find related papers by JEL classification:
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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References listed on IDEAS
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  1. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, vol. 50(1), pages 301-18, March. [Downloadable!] (restricted)
  2. Ron Martin & Peter Sunley, 2002. "Taking risks in regions: the geographical anatomy of Europe's emerging venture capital market," Journal of Economic Geography, Oxford University Press, vol. 2(2), pages 121-150, April.
  3. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January. [Downloadable!] (restricted)
  4. Ron Martin, 1989. "The Growth and Geographical Anatomy of Venture Capitalism in the United Kingdom," Regional Studies, Taylor and Francis Journals, vol. 23(5), pages 389-403, October. [Downloadable!] (restricted)
  5. Gupta, Anil K. & Sapienza, Harry J., 1992. "Determinants of venture capital firms' preferences regarding the industry diversity and geographic scope of their investments," Journal of Business Venturing, Elsevier, vol. 7(5), pages 347-362, September. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Ron Martin & Christian Berndt & Britta Klagge & Peter Sunley, 2005. "Spatial proximity effects and regional equity gaps in the venture capital market: evidence from Germany and the United Kingdom," Environment and Planning A, Pion Ltd, London, vol. 37(7), pages 1207-1231, July. [Downloadable!] (restricted)
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