When Are Venture Capital Projects Initiated?
State University of New York at Buffalo
Joseph T. Mahoney
University of Illinois
September 18, 2009
Journal of Business Venturing, Forthcoming
This paper examines how public market information relates to the initiation of venture capital projects. Analysis of venture capital investments in the U.S. between 1980 and 2007 indicates that venture capitalists tend to defer new investment projects in target industries with substantial market volatility. This delay effect of market volatility is reduced if the target industry experiences high sales growth or if competition among venture capitalists is intense in the target industry. The paper provides further evidence to corroborate the view that venture capitalists rationally respond to market shifts in their investment decisions.
Number of Pages in PDF File: 44
Keywords: Venture capital, real options, investment timing, uncertainty, growth, and competition
JEL Classification: G24, M13
Date posted: February 20, 2008 ; Last revised: April 8, 2012