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Venture Capital Investment Duration

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  • Douglas Cumming
  • Sofia Johan

Abstract

This paper examines cross‐country evidence on the duration of venture capital (VC) investment. We formulate a theory of VC investment duration based on the idea that venture capitalists exit when the expected marginal cost of maintaining the investment is greater than the expected marginal benefit, and thereby relate VC investment duration to entrepreneurial firm characteristics, investor characteristics, deal characteristics, and institutional and market conditions. VC investment duration data in Canada and the United States lend strong support to the theoretical predictions developed herein.

Suggested Citation

  • Douglas Cumming & Sofia Johan, 2010. "Venture Capital Investment Duration," Journal of Small Business Management, Taylor & Francis Journals, vol. 48(2), pages 228-257, April.
    • Handle: RePEc:taf:ujbmxx:v:48:y:2010:i:2:p:228-257
    DOI: 10.1111/j.1540-627X.2010.00293.x
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    Cited by:

    1. Fatima Shuwaikh & Emmanuelle Dubocage & Dennis Murer, 2023. "Underpricing of corporate and independent venture capital-backed IPOs: Do they differ?," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1629-1650, May.
    2. KATO Masatoshi & Nicolas LEGENDRE & YOSHIDA Hiroki, 2022. "Does VC Investor Type Matter? Determinants and effects of VC backing for new firms in Japan," Discussion papers 22117, Research Institute of Economy, Trade and Industry (RIETI).
    3. Switzer, Lorne N. & El Meslmani, Nabil & Zhai, Xinkai, 2022. "IPO performance and the size effect: Evidence for the US and Canada," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).

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