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The Regional Supply of Venture Capital - Can Syndication overcome Bottlenecks?

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  • Michael Fritsch

    ()
    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Dirk Schilder

    ()

Abstract

We investigate whether the supply of venture capital (VC) is driven by spatial proximity between a VC company and the portfolio firm. Our analysis is based on information about VC investments in Germany between 2004 and 2009. We find that possible problems caused by the geographic distance to a portfolio firm seem to be overcome by syndication of investments with one of the VC firms located close to the investment. Our analysis does, however, suggest that short geographic distance between an investor and the investment has an increasing effeon the probability for syndication as well as on the number of firms that join the syndicate. Hence, local VC suppliers may assume a role of an 'anchor' connecting the regional economy to more distant parts of the industry.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-069.

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Date of creation: 05 Oct 2010
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Handle: RePEc:jrp:jrpwrp:2010-069

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Keywords: Venture Capital; syndication; geographic proximity; start-up financing; equity gap;

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  1. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, American Finance Association, vol. 57(6), pages 2533-2570, December.
  2. Ralf Becker & Thomas Hellmann, 2003. "The Genesis of Venture Capital - Lessons from the German Experience," CESifo Working Paper Series 883, CESifo Group Munich.
  3. 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.
  4. Michael Fritsch & Dirk Schilder, 2006. "Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation," Papers on Entrepreneurship, Growth and Public Policy, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group 2006-14, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  5. Douglas J. Cumming, 2006. "The Determinants of Venture Capital Portfolio Size: Empirical Evidence," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 79(3), pages 1083-1126, May.
  6. 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, Oxford University Press, vol. 2(2), pages 121-150, April.
  7. 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.
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Cited by:
  1. Katja Bringmann & Ann Verhetsel & Thomas Vanoutrive & Jo Reynaerts, 2013. "The impact of venture capital linkages on start-ups? cluster embeddedness," ERSA conference papers ersa13p298, European Regional Science Association.
  2. Lutz, Eva & Bender, Marko & Achleitner, Ann-Kristin & Kaserer, Christoph, 2013. "Importance of spatial proximity between venture capital investors and investees in Germany," Journal of Business Research, Elsevier, Elsevier, vol. 66(11), pages 2346-2354.

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