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Duration Analysis of Venture Capital Staging: A Real Options Perspective

37 Pages Posted: 7 Oct 2009 Last revised: 6 May 2012

Yong Li

State University of New York at Buffalo

Date Written: 2008

Abstract

This study takes a real options perspective towards venture capital staging and views the staging decision as a choice between holding the current option to invest and investing now to obtain the option to invest subsequently. It proposes that this staging decision depends on the factors that influence the value of these two options, such as competition and various sources of uncertainty. The empirical results suggest that market uncertainty encourages venture capital firms to delay investing at each round of financing, whereas competition, project-specific uncertainty and agency concerns prompt venture capital firms to invest sooner.

Keywords: Venture capital, Staging, Real options, Uncertainty, Agency

Suggested Citation

Li, Yong, Duration Analysis of Venture Capital Staging: A Real Options Perspective (2008). Journal of Business Venturing, Vol. 23, No. 5, 2008. Available at SSRN: https://ssrn.com/abstract=1483763

Yong Li (Contact Author)

State University of New York at Buffalo ( email )

326 Jacobs Management Center
Amherst, NY 14260
United States

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