Venture Capital as Human Resource Management
Antonio Gledson De Carvalho
Fundacao Getulio Vargas School of Business at Sao Paulo
Charles W. Calomiris
Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)
Joao Amaro de Matos
Nova School of Business and Economics
FEUNL Working Paper No. 470
Part of the way venture capitalists add value to portfolio firms is by obtaining and transferring information about senior managers across firms over time. Information transfer occurs on a significant scale and takes place both among a single venture capitalist's portfolio firms and between different venture capitalists' firms via a network of venture capitalists, which venture capitalists use to locate and relocate managers. We collect and analyze survey data on the operation of this human resource network. Theoretical and empirical analyses indicate that cross-sectional differences among portfolio firms are associated with differences in the intensity with which venture capitalists network. The observable factors relevant in explaining the intensity with which venture capitalists network include: 1) the value of the information transmitted though the network, 2) the riskiness of the activities of the portfolio firms, 3) the size of the venture capital fund, 4) the degree of difficulty in enticing executives to manage portfolio firms, and 5) the reputation of the venture capitalist for successfully recycling managers. We show that each of these factors reflects the costs and benefits to venture capitalists of participating in the network.
Number of Pages in PDF File: 39working papers series
Date posted: February 26, 2006
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