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Venture capital investment: the role of predator-prey dynamics with learning by doing

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  • James Brander
  • Jean-Etienne De Bettignies

Abstract

This paper suggests that endogenous dynamics of the 'predator-prey' type can provide a contributing explanation for both high-venture capital concentration by industry and 'boom and bust' industry-level investment dynamics. We propose a model based on the idea that venture capitalists favor industries where they have significant experience and industries with a large pool of good investment opportunities. However, investment 'uses up' opportunities and therefore tends to deplete the pool of unexploited opportunities. The resulting industry-level interactive dynamics naturally give rise to venture capital investment cycles similar to observed patterns.

Suggested Citation

  • James Brander & Jean-Etienne De Bettignies, 2009. "Venture capital investment: the role of predator-prey dynamics with learning by doing," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(1), pages 1-19.
    • Handle: RePEc:taf:ecinnt:v:18:y:2009:i:1:p:1-19
    DOI: 10.1080/10438590701530066
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    References listed on IDEAS

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    1. Schertler, Andrea, 2003. "Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis," Kiel Working Papers 1172, Kiel Institute for the World Economy (IfW Kiel).
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    Cited by:

    1. Cipollone, Angela & Giordani, Paolo E., 2019. "Market frictions in entrepreneurial innovation: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 297-331.
    2. Pasquale L. Scandizzo & Marco Ventura, 2016. "Innovation and imitation as an interactive process," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(8), pages 821-851, November.
    3. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 573-648, Elsevier.
    4. Vladimir Vladimirovich Kolmakov & Aleksandra Grigorievna Polyakova & Vasily Sergeevich Shalaev, 2015. "An Analysis Of The Impact Of Venture Capital Investment On Economic Growth And Innovation: Evidence From The Usa And Russia," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 60(207), pages 7-38, September.
    5. Kim, Younghwan & Kim, Wonjoon & Yang, Taeyong, 2012. "The effect of the triple helix system and habitat on regional entrepreneurship: Empirical evidence from the U.S," Research Policy, Elsevier, vol. 41(1), pages 154-166.

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