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Buy Local? The Geography of Venture Capital

In: Cities and Entrepreneurship

  • Henry Chen
  • Paul Gompers
  • Anna Kovner
  • Josh Lerner

We document geographic concentration by both venture capital firms and venture capital-financed companies in three metropolitan areas: San Francisco, Boston, and New York. We find that venture capital firms locate in regions with high success rates of venture capital-backed investments. Geography is also significantly related to outcomes. Venture capital firms based in locales that are venture capital centers outperform, regardless of the stage of the investment. This outperformance arises from outsized performance outside of the venture capital firms' office locations, including in peripheral locations. If the goal of state and local policy makers is to encourage venture capital investment, outperformance of non-local investments suggests that policy makers might want to mitigate costs associated with established venture capitalists investing in their geographies rather than encouraging the establishment of new venture capital firms.

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This chapter was published in:
  • Edward L. Glaeser & Stuart S. Rosenthal & William C. Strange, 2010. "Cities and Entrepreneurship," NBER Books, National Bureau of Economic Research, Inc, number glae09-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11892.
    Handle: RePEc:nbr:nberch:11892
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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