IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/4759.html
   My bibliography  Save this paper

Does Competition Kill Ties?

Author

Listed:
  • Lai, Richard

Abstract

Venture capital firms (VCs) form syndicates that compete to invest in deals. Does more competition makes it less likely that VCs will choose syndicate partners based on past ties? Using over 200,000 observations on how VCs choose each other in 572 biotech deals in Massachussetts from 1967 through 2004, I find the answer is: yes. The theory of embeddedness argues that past ties can explain the pattern of who works with who. I interpret my finding as a first step in demarcating when embeddedness might apply and when atomistic, calculative, economic forces might be a better explanation of who works with who.

Suggested Citation

  • Lai, Richard, 2005. "Does Competition Kill Ties?," MPRA Paper 4759, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4759
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/4759/1/MPRA_paper_4759.pdf
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
    2. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    3. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, April.
    4. Gompers, Paul & Lerner, Josh, 2000. "Money chasing deals? The impact of fund inflows on private equity valuation," Journal of Financial Economics, Elsevier, vol. 55(2), pages 281-325, February.
    5. Mitchell A. Petersen & Raghuram G. Rajan, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 407-443.
    6. Malcolm Baker & Jeffrey Wurgler, 2004. "A Catering Theory of Dividends," Journal of Finance, American Finance Association, vol. 59(3), pages 1125-1165, June.
    7. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
    8. Narayanan, M P, 1985. " Managerial Incentives for Short-term Results," Journal of Finance, American Finance Association, vol. 40(5), pages 1469-1484, December.
    9. Brian Uzzi & Ryon Lancaster, 2003. "Relational Embeddedness and Learning: The Case of Bank Loan Managers and Their Clients," Management Science, INFORMS, vol. 49(4), pages 383-399, April.
    10. Baker, Malcolm & Gompers, Paul A, 2003. "The Determinants of Board Structure at the Initial Public Offering," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 569-598, October.
    11. Paul Almeida & Bruce Kogut, 1999. "Localization of Knowledge and the Mobility of Engineers in Regional Networks," Management Science, INFORMS, vol. 45(7), pages 905-917, July.
    12. Hirschman, Albert O, 1982. "Rival Interpretations of Market Society: Civilizing, Destructive, or Feeble?," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1463-1484, December.
    13. Granovetter, Mark, 2000. "A Theoretical Agenda for Economic Sociology," Center for Culture, Organizations and Politics, Working Paper Series qt4mk4g08q, Center for Culture, Organizations and Politics of theInstitute for Research on Labor and Employment, UC Berkeley.
    14. Steven Kaplan & Antoinette Schoar, 2003. "Private Equity Performance: Returns, Persistence and Capital," NBER Working Papers 9807, National Bureau of Economic Research, Inc.
    15. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-1489, December.
    16. Bolton, Patrick & Scharfstein, David S, 1996. "Optimal Debt Structure and the Number of Creditors," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 1-25, February.
    17. Mathias Dewatripont & Jean Tirole, 1994. "A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1027-1054.
    18. Bresnahan, Timothy F & Gambardella, Alfonso & Saxenian, AnnaLee, 2001. "'Old Economy' Inputs for 'New Economy' Outcomes: Cluster Formation in the New Silicon Valleys," Industrial and Corporate Change, Oxford University Press, vol. 10(4), pages 835-860, December.
    19. Bengt Holmström, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 169-182.
    20. Fehr, Ernst, et al, 1998. "When Social Norms Overpower Competition: Gift Exchange in Experimental Labor Markets," Journal of Labor Economics, University of Chicago Press, vol. 16(2), pages 324-351, April.
    21. Kachelmeier, Steven J. & Shehata, Mohamed, 1992. "Culture and competition: A laboratory market comparison between China and the West," Journal of Economic Behavior & Organization, Elsevier, vol. 19(2), pages 145-168, October.
    22. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    embeddedness; venture capital; ties; competition;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:4759. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.