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Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion

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  • Henry Chen
  • Paul Gompers
  • Anna Kovner
  • Josh Lerner

Abstract

We document geographic concentration by both venture capital firms and venture capital-financed companies in three cities – San Francisco, Boston, and New York. We find that firms open new satellite offices based on the success rate of venture capital-backed investments in an area. Geography is also significantly related to outcomes. Venture capital firms based in locales that are venture capital centers outperform, regardless of the stage of the investment. Ironically, this outperformance arises from outsized performance outside of the venture capital firms’ office locations, including in peripheral locations. If the goal of state and local policy makers is to encourage venture capital investment, outperformance of non-local investments suggests that policy makers might want to mitigate costs associated with established venture capitalists investing in their geographies rather than encouraging the establishment of new venture capital firms

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15102.

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Date of creation: Jun 2009
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Publication status: published as Chen, Henry, Paul A. Gompers, Anna Kovner, and Josh Lerner. "Buy Local? The Geography of Successful Venture Capital Expansion." Journal of Urban Economics 67, no. 1 (January 2010).
Handle: RePEc:nbr:nberwo:15102

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Cited by:
  1. Haizhi Wang & Robert Wuebker & Shu Han & Michael Ensley, 2012. "Strategic alliances by venture capital backed firms: an empirical examination," Small Business Economics, Springer, Springer, vol. 38(2), pages 179-196, February.
  2. Bradley, Samantha R. & Gicheva, Dora & Hassell, Lydia & Link, Albert N., 2013. "Gender Differences in Access to Private Investment Funding to Support the Development of New Technologies," Working Papers 13-9, University of North Carolina at Greensboro, Department of Economics.
  3. L. Bottazzi & M. Da Rin & T. Hellmann, 2007. "The Importance of Trust for Investment: Evidence from Venture Capital," Working Papers 612, Dipartimento Scienze Economiche, Universita' di Bologna.
  4. Dessi, Roberta, 2011. "Innovation, Spillovers and Venture Capital Contracts," TSE Working Papers, Toulouse School of Economics (TSE) 11-253, Toulouse School of Economics (TSE), revised Dec 2013.
  5. Edward L. Glaeser & Stuart S. Rosenthal & William C. Strange, 2009. "Urban Economics and Entrepreneurship," NBER Working Papers 15536, National Bureau of Economic Research, Inc.
  6. Flavia-Diana NISTOR, 2011. "WHICH ARE THE FACTORS INFLUENCING FINANCING DECISIONS IN SMEs?," Proceedings of the International Conference Investments and Economic Recovery, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(1), pages 32-36, December.
  7. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
  8. Dan Cristian POPESCU, 2012. "Corporations, Entrepreneurs And Urban Development," REVISTA ADMINISTRATIE SI MANAGEMENT PUBLIC, Faculty of Administration and Public Management, Academy of Economic Studies, Bucharest, Romania, vol. 2012(8), pages 386-396, June.
  9. Angela Cipollone & Paolo E. Giordani, 2012. "Animal Spirits in Entrepreneurial Innovation: Theory and Evidence," Working Papers CELEG 1201, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  10. Bottazzi, L. & Da Rin, M. & Hellmann, T., 2010. "The Importance of Trust for Investment: Evidence From Venture Capital (Revision of DP 2009-43)," Discussion Paper, Tilburg University, Center for Economic Research 2010-49, Tilburg University, Center for Economic Research.
  11. Naomi Hausman, 2012. "University Innovation, Local Economic Growth, and Entrepreneurship," Working Papers 12-10, Center for Economic Studies, U.S. Census Bureau.
  12. Dessi, Roberta, 2011. "Innovation, Spillovers and Venture Capital Contracts," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 684, Institut d'Économie Industrielle (IDEI), Toulouse, revised Dec 2013.
  13. Anna Kovner & Josh Lerner, 2012. "Doing well by doing good? Community development venture capital," Staff Reports, Federal Reserve Bank of New York 572, Federal Reserve Bank of New York.

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