Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion
AbstractWe 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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15102.
Date of creation: Jun 2009
Date of revision:
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).
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Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-CFN-2009-07-03 (Corporate Finance)
- NEP-ENT-2009-07-03 (Entrepreneurship)
- NEP-GEO-2009-07-03 (Economic Geography)
- NEP-URE-2009-07-03 (Urban & Real Estate Economics)
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