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Venture capital investor type and the growth mode of new technology-based firms

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  • Fabio Bertoni
  • Massimo Colombo
  • Luca Grilli

Abstract

Independent venture capital (IVC) investors have more powerful incentives than corporate venture capital (CVC) investors to take actions that signal their capabilities (i.e. to “grandstand”). We argue that this should engender differences in the treatment effect of IVC and CVC on the mode of growth of portfolio companies. Short-term sales growth of IVC-backed firms in the period that immediately follows the VC investment should outpace that of CVC-backed firms, while we expect no difference in employment growth. We find support for these theoretical predictions on a sample of 531 Italian new technology-based firms, using several panel estimators to control for endogeneity of IVC and CVC. Copyright Springer Science+Business Media, LLC. 2013

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  • Fabio Bertoni & Massimo Colombo & Luca Grilli, 2013. "Venture capital investor type and the growth mode of new technology-based firms," Small Business Economics, Springer, vol. 40(3), pages 527-552, April.
    • Handle: RePEc:kap:sbusec:v:40:y:2013:i:3:p:527-552
    DOI: 10.1007/s11187-011-9385-9
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    More about this item

    Keywords

    Venture capital; Corporate venture capital; High-tech start-ups; Firm growth; Grandstanding; D92; G24; L21; L26;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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