Spatial collocation and venture capital in the US biotechnology industry
Biotechnology firms operate in a high-risk and high-reward environment and are in a constant race to secure venture capital (VC) funds. Previous contributions to the literature show that the VC firms tend to invest locally in order to monitor their investments and to provide operating assistance to their target firms. Further, biotechnology is a knowledge-based industry that tends to exhibit spatial clusters, and the firms in such industries may collocate to benefit from gaining access to local markets for specialized inputs (e.g., skilled researchers) and from local knowledge spillovers and network externalities. If such gains exist, we expect that the collocated firms should exhibit positively correlated performance, including in their ability to attract venture capital funds. The purpose of this paper is to empirically measure the strength and spatial extent of the relationships among the amount of funds raised by proximate biotechnology firms. We model these relationships with a spatial autoregression (SAR) model, and we control for characteristics of the biotechnology firms and the VC firms that provide their funds as well as site-specific factors. Based on our fitted SAR model, we find that the amount of venture capital raised by a particular biotechnology firm is significantly influenced by the number of VC firms and the VC funding levels raised by biotechnology firms located within a 10-mile radius, but these relationships are not statistically significant beyond this range.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Catherine Beaudry & Stefano Breschi, 2003. "Are firms in clusters really more innovative?," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(4), pages 325-342.
- Lee, Peggy M. & Wahal, Sunil, 2004. "Grandstanding, certification and the underpricing of venture capital backed IPOs," Journal of Financial Economics, Elsevier, vol. 73(2), pages 375-407, August.
- Wolfgang Keller, 2000.
"Geographic Localization of International Technology Diffusion,"
NBER Working Papers
7509, National Bureau of Economic Research, Inc.
- Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March.
- Keller, Wolfgang, 2001. "Geographic Localization of International Technology Diffusion," CEPR Discussion Papers 2706, C.E.P.R. Discussion Papers.
- Corinne Autant-Bernard & Pascal Billand & Nadine Massard & David Frachisse, 2007.
"Social distance versus spatial distance in R & D cooperation: Empirical evidence from European collaboration choices in micro and nanotechnologies,"
- Corinne Autant-Bernard & Pascal Billand & David Frachisse & Nadine Massard, 2007. "Social distance versus spatial distance in R&D cooperation: Empirical evidence from European collaboration choices in micro and nanotechnologies," Papers in Regional Science, Wiley Blackwell, vol. 86(3), pages 495-519, 08.
- Jarunee Wonglimpiyarat, 2006. "The Boston Route 128 Model Of High-Tech Industry Development," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 47-63.
- Catherine Beaudry, 2001. "Entry, Growth and Patenting in Industrial Clusters: A Study of the Aerospace Industry in the UK," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(3), pages 405-436.
- Zacharakis, Andrew L. & Meyer, G. Dale, 1998. "A lack of insight: do venture capitalists really understand their own decision process?," Journal of Business Venturing, Elsevier, vol. 13(1), pages 57-76, January.
- Franzese, Robert J. & Hays, Jude C., 2007. "Spatial Econometric Models of Cross-Sectional Interdependence in Political Science Panel and Time-Series-Cross-Section Data," Political Analysis, Cambridge University Press, vol. 15(02), pages 140-164, March.
- Anselin, Luc & Varga, Attila & Acs, Zoltan, 1997. "Local Geographic Spillovers between University Research and High Technology Innovations," Journal of Urban Economics, Elsevier, vol. 42(3), pages 422-448, November.
- Amit, Raphael & Brander, James & Zott, Christoph, 1998. "Why do venture capital firms exist? theory and canadian evidence," Journal of Business Venturing, Elsevier, vol. 13(6), pages 441-466, November.
- Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
- Lars Coenen & Jerker Moodysson & Bjørn T. Asheim, 2004. "Nodes, networks and proximities: on the knowledge dynamics of the Medicon Valley biotech cluster," European Planning Studies, Taylor & Francis Journals, vol. 12(7), pages 1003-1018, June.
- Stéphane Lemarié & Vincent Mangematin & A. Torre, 2001.
"Is the Creation and Development of Biotech SMEs Localised? Conclusions Drawn from the French Case,"
Grenoble Ecole de Management (Post-Print)
- Lemarie, Stephane & Mangematin, Vincent & Torre, Andre, 2001. "Is the Creation and Development of Biotech SMEs Localised? Conclusions Drawn from the French Case," Small Business Economics, Springer, vol. 17(1-2), pages 61-76, Aug.-Sept.
- Scott Shane & Daniel Cable, 2002. "Network Ties, Reputation, and the Financing of New Ventures," Management Science, INFORMS, vol. 48(3), pages 364-381, March.
- Lars Håkanson, 2005. "Epistemic Communities and Cluster Dynamics: On the Role of Knowledge in Industrial Districts," Industry and Innovation, Taylor & Francis Journals, vol. 12(4), pages 433-463.
- Lee, Lung-Fei, 2002. "Consistency And Efficiency Of Least Squares Estimation For Mixed Regressive, Spatial Autoregressive Models," Econometric Theory, Cambridge University Press, vol. 18(02), pages 252-277, April.
- Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages 54-72, February.
- James D. Adams & Adam B. Jaffe, 1996.
"Bounding the Effects of R&D: An Investigation Using Matched Establishment-Firm Data,"
RAND Journal of Economics,
The RAND Corporation, vol. 27(4), pages 700-721, Winter.
- James D. Adams & Adam B. Jaffe, 1996. "Bounding the Effects of R&D: An Investigation Using Matched Establishment-Firm Data," NBER Working Papers 5544, National Bureau of Economic Research, Inc.
- Macmillan, Ian C. & Kulow, David M. & Khoylian, Roubina, 1989. "Venture capitalists' involvement in their investments: Extent and performance," Journal of Business Venturing, Elsevier, vol. 4(1), pages 27-47, January.
- Döring, Thomas & Schnellenbach, Jan, 2004.
"What Do We Know About Geographical Knowledge Spillovers and Regional Growth? A Survey of the Literature,"
14, Deutsche Bank Research.
- Thomas Doring & Jan Schnellenbach, 2006. "What do we know about geographical knowledge spillovers and regional growth?: A survey of the literature," Regional Studies, Taylor & Francis Journals, vol. 40(3), pages 375-395.
- Maryann Feldman, 1999. "The New Economics Of Innovation, Spillovers And Agglomeration: Areview Of Empirical Studies," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 5-25.
- Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
- Robert Plant, 2007. "An Empirical Analysis: Venture Capital Clusters And Firm Migration," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 139-163.
- Hector Rocha, 2004. "Entrepreneurship and Development: The Role of Clusters," Small Business Economics, Springer, vol. 23(5), pages 363-400, October.
- Claire Champenois & Dirk Engel & Oliver Heneric, 2006. "What kind of German biotechnology start-ups do venture capital companies and corporate investors prefer for equity investments?," Applied Economics, Taylor & Francis Journals, vol. 38(5), pages 505-518.
- Henderson, Vernon, 1997.
"Externalities and Industrial Development,"
Journal of Urban Economics,
Elsevier, vol. 42(3), pages 449-470, November.
- Lerner, Josh, 1999. "The Government as Venture Capitalist: The Long-Run Impact of the SBIR Program," The Journal of Business, University of Chicago Press, vol. 72(3), pages 285-318, July.
- Amin, Ash & Wilkinson, Frank, 1999. "Learning, Proximity and Industrial Performance: An Introduction," Cambridge Journal of Economics, Oxford University Press, vol. 23(2), pages 121-125, March.
- Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
- Hector Rocha & Rolf Sternberg, 2005. "Entrepreneurship: The Role of Clusters Theoretical Perspectives and Empirical Evidence from Germany," Small Business Economics, Springer, vol. 24(3), pages 267-292, 02.
- de Bettignies, Jean-Etienne & Brander, James A., 2007. "Financing entrepreneurship: Bank finance versus venture capital," Journal of Business Venturing, Elsevier, vol. 22(6), pages 808-832, November.
- Ron Boschma, 2005. "Proximity and Innovation: A Critical Assessment," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 61-74.
- Gompers, Paul A., 1996. "Grandstanding in the venture capital industry," Journal of Financial Economics, Elsevier, vol. 42(1), pages 133-156, September.
- J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
- McKelvey, Maureen & Alm, Hakan & Riccaboni, Massimo, 2003. "Does co-location matter for formal knowledge collaboration in the Swedish biotechnology-pharmaceutical sector?," Research Policy, Elsevier, vol. 32(3), pages 483-501, March.
- Stuart, Toby & Sorenson, Olav, 2003. "The geography of opportunity: spatial heterogeneity in founding rates and the performance of biotechnology firms," Research Policy, Elsevier, vol. 32(2), pages 229-253, February.
- Michael Funke & Annekatrin Niebuhr, 2005. "Regional Geographic Research and Development Spillovers and Economic Growth: Evidence from West Germany," Regional Studies, Taylor & Francis Journals, vol. 39(1), pages 143-153.
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
- Agrawal, Ajay & Cockburn, Iain, 2003. "The anchor tenant hypothesis: exploring the role of large, local, R&D-intensive firms in regional innovation systems," International Journal of Industrial Organization, Elsevier, vol. 21(9), pages 1227-1253, November.
When requesting a correction, please mention this item's handle: RePEc:eee:respol:v:40:y:2011:i:9:p:1188-1199. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.