Abstract

http://ssrn.com/abstract=1420371
 
 

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Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion


Henry Chen


Harvard Business School

Paul A. Gompers


Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Anna Kovner


Federal Reserve Bank of New York

Josh Lerner


Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

June 15, 2009

Harvard Business School Finance Working Paper No. 1420371

Abstract:     
We document geographic concentration by both venture capital firms and venture capital-financed companies in three cities - San Francisco, Boston, and New York. We find that firms open new satellite offices based on the success rate of venture capital-backed investments in an area. 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. Ironically, this outperformance arises from outsized performance outside of the venture capital firms' office locations, including in peripheral locations. Outperformance of non-local investments suggests that policy makers in regions without local venture capitalists might want to mitigate costs associated with established venture capitalists investing in their geographies rather than encouraging the establishment of new venture capital firms.

Number of Pages in PDF File: 41

Keywords: entrepreneurship, private equity, regional location

JEL Classification: G24, R12

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Date posted: June 16, 2009  

Suggested Citation

Chen, Henry and Gompers, Paul A. and Kovner, Anna and Lerner, Josh, Buy Local? The Geography of Successful and Unsuccessful Venture Capital Expansion (June 15, 2009). Harvard Business School Finance Working Paper No. 1420371. Available at SSRN: http://ssrn.com/abstract=1420371 or http://dx.doi.org/10.2139/ssrn.1420371

Contact Information

Henry Chen
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
Paul A. Gompers
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)
Harvard University - Entrepreneurial Management Unit ( email )
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Anna Kovner
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
Josh Lerner (Contact Author)
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)
HOME PAGE: http://www.people.hbs.edu/jlerner/
Harvard University - Entrepreneurial Management Unit
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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