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Is venture capital a regional business? The role of syndication

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  • Fritsch, Michael
  • Schilder, Dirk

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 in the year 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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Bibliographic Info

Paper provided by TU Bergakademie Freiberg, Faculty of Economics and Business Administration in its series Freiberg Working Papers with number 2006,09.

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Date of creation: 2006
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Handle: RePEc:zbw:tufwps:200609

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

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References

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  1. Schilder, Dirk, 2006. "Public venture capital in Germany: task force or forced task?," Freiberg Working Papers 2006,12, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  2. 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.
  3. Fritsch, Michael & Schilder, Dirk, 2006. "Does venture capital investment really require spatial proximity? An empirical investigation," Freiberg Working Papers 2006,07, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  4. Andy Lockett & Mike Wright, 1999. "The syndication of private equity: Evidence from the UK," Venture Capital, Taylor & Francis Journals, Taylor & Francis Journals, vol. 1(4), pages 303-324, October.
  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.
  6. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January.
  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.
  8. 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.
  9. Walter Powell & Kenneth Koput & James Bowie & Laurel Smith-Doerr, 2002. "The Spatial Clustering of Science and Capital: Accounting for Biotech Firm-Venture Capital Relationships," Regional Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(3), pages 291-305.
  10. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, American Finance Association, vol. 50(5), pages 1461-89, December.
  11. Mike Wright & Andy Lockett, 2003. "The Structure and Management of Alliances: Syndication in the Venture Capital Industry," Journal of Management Studies, Wiley Blackwell, Wiley Blackwell, vol. 40(8), pages 2073-2102, December.
  12. 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.
  13. Lerner, Josh, 1995. " Venture Capitalists and the Oversight of Private Firms," Journal of Finance, American Finance Association, American Finance Association, vol. 50(1), pages 301-18, March.
  14. Robinson, Richard Jr., 1987. "Emerging strategies in the venture capital industry," Journal of Business Venturing, Elsevier, vol. 2(1), pages 53-77.
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Cited by:
  1. Schilder, Dirk, 2006. "Public venture capital in Germany: task force or forced task?," Freiberg Working Papers 2006,12, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
  2. Bender, Marko & Lutz, Eva, 2009. "Patterns in spatial proximity between venture capital investors and investees in Germany: an empirical analysis," CEFS Working Paper Series 2009-06, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  3. Achleitner, Ann-Kristin & Bender, Marko & Kaserer, Christoph & Lutz, Eva, 2010. "Geographic location of a new venture and the likelihood of a venture capital investment," CEFS Working Paper Series 2010-02, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  4. Achleitner, Ann-Kristin & Braun, Reiner & Bender, Marko & Geidner, Annabell, 2008. "Community development venture capital: concept and status quo in Germany," CEFS Working Paper Series 2008-03, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
  5. Alexandra Schröter, 2008. "Perspektiven der Innovationspolitik in den neuen Bundesländern," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 15(02), pages 40-52, 04.

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