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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.

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  • 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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    Cited by:

    1. Nils Ellwanger & Ron Boschma, 2013. "Who acquires whom? The role of geographical proximity and industrial relatedness in Dutch domestic M&As between 2002 and 2008," Papers in Evolutionary Economic Geography (PEEG) 1319, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Oct 2013.
    2. Michael Fritsch & Dirk Schilder, 2006. "Is Venture Capital a regional business? – The role of syndication," Papers on Entrepreneurship, Growth and Public Policy 2006-25, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    3. Viktor Slavtchev & Devrim Göktepe-Hultén, 2016. "Support for public research spin-offs by the parent organizations and the speed of commercialization," The Journal of Technology Transfer, Springer, vol. 41(6), pages 1507-1525, December.
    4. Dorothea Schäfer & Dirk Schilder, 2008. "Smart capital in German start-ups -- an empirical analysis," Venture Capital, Taylor & Francis Journals, vol. 11(2), pages 163-183, August.
    5. Backman, Mikaela, 2013. "Banks and New Firm Formation," Working Paper Series in Economics and Institutions of Innovation 301, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    6. Erik E. Lehmann & Nikolaus Seitz & Katharine Wirsching, 2017. "Smart finance for smart places to foster new venture creation," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(1), pages 51-75, March.
    7. Katja Bringmann & Ann Verhetsel & Thomas Vanoutrive & Jo Reynaerts, 2013. "The impact of venture capital linkages on start-ups' cluster embeddedness," ERSA conference papers ersa13p298, European Regional Science Association.
    8. Michael Fritsch & Dirk Schilder, 2012. "The Regional Supply of Venture Capital: Can Syndication Overcome Bottlenecks?," Economic Geography, Clark University, vol. 88(1), pages 59-76, January.
    9. 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, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    10. Lutz, Eva & Bender, Marko & Achleitner, Ann-Kristin & Kaserer, Christoph, 2013. "Importance of spatial proximity between venture capital investors and investees in Germany," Journal of Business Research, Elsevier, vol. 66(11), pages 2346-2354.
    11. repec:oup:indcch:v:27:y:2018:i:1:p:189-220. is not listed on IDEAS
    12. Schilder, Dirk, 2007. "Venture capital syndicate networks: the determinants of interconnectedness," Freiberg Working Papers 2007,03, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    13. Janna Alvedalen & Ron Boschma, 2017. "A critical review of entrepreneurial ecosystems research: towards a future research agenda," European Planning Studies, Taylor & Francis Journals, vol. 25(6), pages 887-903, June.
    14. Martin Borowiecki & Karl-Heinz Leitner, 2015. "Determinants of new business formation in China: Regional evidence from a panel data model," ERSA conference papers ersa15p598, European Regional Science Association.
    15. Alexandra Schröter, 2008. "Perspektiven der Innovationspolitik in den neuen Bundesländern," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(02), pages 40-52, 04.
    16. Richard Harrison & Colin Mason & Paul Robson, 2010. "Determinants of long-distance investing by business angels in the UK," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 22(2), pages 113-137, March.
    17. 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, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    18. Terttu Luukkonen, & Mari Maunula,, 2006. "Coaching Small Biotech Companies into Success: The Value-adding Function of VC," Discussion Papers 1032, The Research Institute of the Finnish Economy.
    19. David Devigne & Tom Vanacker & Sophie Manigart & Ine Paeleman, 2013. "The role of domestic and cross-border venture capital investors in the growth of portfolio companies," Small Business Economics, Springer, vol. 40(3), pages 553-573, April.
    20. José Ernesto Amorós & Miguel Atienza & Gianni Romaní, 2008. "Formal and Informal Equity Funding in Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 35(2 Year 20), pages 179-194, December.
    21. 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, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    22. Fabio Bertoni & Massimo Colombo & Anita Quas, 2015. "The patterns of venture capital investment in Europe," Small Business Economics, Springer, vol. 45(3), pages 543-560, October.
    23. 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.
    24. Yana Borissenko & Ron Boschma, 2016. "A critical review of entrepreneurial ecosystems: towards a future research agenda," Papers in Evolutionary Economic Geography (PEEG) 1630, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2016.

    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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