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Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation

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  • Michael Fritsch

    (Faculty of Economics and Business Administration, Friedrich-Schiller-University Jena, Carl-Zeiss-Strasse 3, 07743 Jena, Germany; also German Institute for Economic Research (DIW), Berlin, and Max Planck Institute of Economics, Jena)

  • Dirk Schilder

    (Faculty of Economics and Business Administration, TU Bergakademie Freiberg, Lessingstrasse 45, 09596 Freiberg, Germany)

Abstract

We examine the role of spatial proximity for venture capital (VC) investments in Germany. The main database is a survey of seventy-five personal interviews with representatives of different types of financial institutions. The analysis shows that spatial proximity is much less important for VC investments than is often believed. The results indicate that telecommunication cannot be regarded as a means of overcoming the problems of geographical distance. We find that VC suppliers frequently syndicate investments in distant portfolio firms with partners who are more closely located. The age of the portfolio firm does not affect the importance of spatial proximity. On the whole, regional proximity is not a dominant factor in VC partnerships.

Suggested Citation

  • Michael Fritsch & Dirk Schilder, 2008. "Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation," Environment and Planning A, , vol. 40(9), pages 2114-2131, September.
  • Handle: RePEc:sae:envira:v:40:y:2008:i:9:p:2114-2131
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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