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Why do European Venture Capital Companies syndicate?

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Author Info

  • Sophie Manigart

    ()

  • Andy Lockett
  • Miguel Meuleman

    ()

  • Mike Wright
  • Hans Landstrm
  • Hans Bruining
  • Philippe Desbrieres
  • Ulrich Hommel

    (Vlerick Leuven Gent Management School)

Abstract

Financial theory, resource-based theory and access to deal flow are used to explain syndication practices among European venture capital (VC) firms. The desire to share risk and increase portfolio diversification is a more important motive for syndication than the desire to access additional intangible resources or deal flow. Access to resources is, however, more important for non-lead than for lead investors. When resource-based motives are more important, the propensity to syndicate increases. Syndication intensity is higher for young VC firms and for VC firms, specialised in a specific investment stage. Finally, syndication strategies are similar across European countries, but differ from North American strategies.

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Bibliographic Info

Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2002-20.

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Length: 38 pages
Date of creation: 15 Oct 2002
Date of revision:
Handle: RePEc:vlg:vlgwps:2002-20

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References

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  1. Mike Wright, 1998. "Venture Capital and Private Equity: A Review and Synthesis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 521-570.
  2. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
  3. Raaj Kumar Sah & Joseph E. Stiglitz, 1984. "The Architecture of Economic Systems: Hierarchies and Polyarchies," NBER Working Papers 1334, National Bureau of Economic Research, Inc.
  4. Kanniainen, V. & Keuschnigg, C., 2000. "The Optimal Portfolio of Start-up Firms in Venture Capital Finance," University of Helsinki, Department of Economics 486, Department of Economics.
  5. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
  6. Manigart, Sophie & De Waele, Koen & Wright, Mike & Robbie, Ken & Desbrieres, Philippe & Sapienza, Harry J. & Beekman, Amy, 2002. "Determinants of required return in venture capital investments: a five-country study," Journal of Business Venturing, Elsevier, vol. 17(4), pages 291-312, July.
  7. Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
  8. Lockett, Andy & Wright, Mike, 2001. "The syndication of venture capital investments," Omega, Elsevier, vol. 29(5), pages 375-390, October.
  9. Douglas J. Cumming, 2006. "The Determinants of Venture Capital Portfolio Size: Empirical Evidence," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1083-1126, May.
  10. Christopher B. Barry, 1994. "New Directions in Research on Venture Capital Finance," Financial Management, Financial Management Association, vol. 23(3), Fall.
  11. Elango, B. & Fried, Vance H. & Hisrich, Robert D. & Polonchek, Amy, 1995. "How venture capital firms differ," Journal of Business Venturing, Elsevier, vol. 10(2), pages 157-179, March.
  12. James A. Brander & Raphael Amit & Werner Antweiler, 2002. "Venture-Capital Syndication: Improved Venture Selection vs. The Value-Added Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 423-452, 09.
  13. Bygrave, William D., 1987. "Syndicated investments by venture capital firms: A networking perspective," Journal of Business Venturing, Elsevier, vol. 2(2), pages 139-154.
  14. 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. Douglas Cumming & Sofia Johan, 2006. "Provincial preferences in private equity," Financial Markets and Portfolio Management, Springer, vol. 20(4), pages 369-398, December.
  2. Douglas Cumming & Sofia Johan, 2007. "Advice and monitoring in venture finance," Financial Markets and Portfolio Management, Springer, vol. 21(1), pages 3-43, March.
  3. Rainer Lauterbach & Isabell Welpe & Jan Fertig, 2007. "Performance differentiation: cutting losses and maximizing profits of private equity and venture capital investments," Financial Markets and Portfolio Management, Springer, vol. 21(1), pages 45-67, March.
  4. Christian Hopp & Finn Rieder, 2004. "What drives Venture Capital Syndication," Finance 0412023, EconWPA, revised 12 Jan 2006.
  5. Cumming, Douglas J. & MacIntosh, Jeffrey G., 2006. "Crowding out private equity: Canadian evidence," Journal of Business Venturing, Elsevier, vol. 21(5), pages 569-609, September.
  6. Carola Jungwirth & Petra Moog, 2004. "Closing the gap or enlarging the pool: How venture capitalist differ in their syndication motives," Working Papers 0023, University of Zurich, Institute for Strategy and Business Economics (ISU).
  7. van den Ende, J.C.M. & Dolfsma, W.A., 2002. "Technology Push, Demand Pull And The Shaping Of Technological Paradigms - Patterns In The Development Of Computing Technology," ERIM Report Series Research in Management ERS-2002-93-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  8. Magala, S.J., 2002. "Elective Identities, (Culture, Identization and Integration)," ERIM Report Series Research in Management ERS-2002-92-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  9. Bruining, H. & Verwaal, E. & Lockett, A. & Wright, D.M. & Manigart, S., 2005. "Firm Size Effects on Venture Capital Syndication: The Role of Resources and Transaction Costs," ERIM Report Series Research in Management ERS-2005-077-STR, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  10. Miguel Angel Campo-Rembado, 2005. "The First Deal Might Be The Last: Building Long Term Relationships In The Venture Capital Community," Working Papers 05-11, NET Institute, revised Oct 2005.
  11. Parhankangas, Annaleena & Landstrom, Hans, 2006. "How venture capitalists respond to unmet expectations: The role of social environment," Journal of Business Venturing, Elsevier, vol. 21(6), pages 773-801, November.
  12. Yang, Yi & Narayanan, V.K. & Zahra, Shaker, 2009. "Developing the selection and valuation capabilities through learning: The case of corporate venture capital," Journal of Business Venturing, Elsevier, vol. 24(3), pages 261-273, May.
  13. Cumming, Douglas J., 2005. "Agency costs, institutions, learning, and taxation in venture capital contracting," Journal of Business Venturing, Elsevier, vol. 20(5), pages 573-622, September.
  14. Christian Hopp, 2010. "When do venture capitalists collaborate? Evidence on the driving forces of venture capital syndication," Small Business Economics, Springer, vol. 35(4), pages 417-431, November.
  15. Douglas Cumming & Grant Fleming & Armin Schwienbacher, 2008. "Financial intermediaries, ownership structure and the provision of venture capital to SMEs: evidence from Japan," Small Business Economics, Springer, vol. 31(1), pages 59-92, June.
  16. Johan, S.A. & Cumming, D., 2006. "Corporate social responsibility: domestic and international private equity institutional investment," Discussion Paper 2006-002, Tilburg University, Tilburg Law and Economic Center.
  17. van den Ende, J.C.M., 2002. "Modes of governance of new service development for mobile networks. A life cycle perspective," ERIM Report Series Research in Management ERS-2002-94-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.

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