Venture Capital Firm Experience and Company Growth
Frontiers of Entrepreneurship Research, 2008
15 Pages Posted: 4 Mar 2009 Last revised: 11 Mar 2009
Academics argue that growth studies should be longitudinal, because organizational growth is inherently a dynamic measure of change over time. The goal of this paper is (a) to gain an insight into the temporal pattern of growth within venture capital backed companies and (b) to study the impact of differences in venture capital firm (VCF) experience on this growth pattern. For this purpose, a unique longitudinal database is used, related to a sample of 100 venture capital backed companies that are followed from the year of VCF participation up to five years after VCF participation. It is shown how Linear Mixed Models (LMMs) can be used to examine dynamic issues in growth studies. Contrary to prior studies (implicitly) assuming a constant growth rate across time, which is in line with Gibrat's law, I present evidence of non-linearities in growth trajectories. Results further indicate that ventures backed by VCFs with high overall or industry deal experience grow significantly faster in terms of total assets compared to ventures backed by VCFs with low overall or industry deal experience.
JEL Classification: M13
Suggested Citation: Suggested Citation