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Local bias in venture capital investments

  • Cumming, Douglas
  • Dai, Na

This paper examines local bias in the context of venture capital (VC) investments. Based on a sample of U.S. VC investments between 1980 and June 2009, we find more reputable VCs (older, larger, more experienced, and with stronger IPO track record) and VCs with broader networks exhibit less local bias. Staging and specialization in technology industries increase VCs' local bias. We also find that the VC exhibits stronger local bias when it acts as the lead VC and when it is investing alone. Finally, we show that distance matters for the eventual performance of VC investments.

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Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 17 (2010)
Issue (Month): 3 (June)
Pages: 362-380

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Handle: RePEc:eee:empfin:v:17:y:2010:i:3:p:362-380
Contact details of provider: Web page: http://www.elsevier.com/locate/jempfin

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