Local Bias in Venture Capital Investments

43 Pages Posted: 6 Nov 2009

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Na Dai

SUNY at Albany - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 6, 2009

Abstract

This paper examines local bias in the context of venture capital (VC) investments. Based on a sample of US VC investments between 1980 and June 2009, we find more reputable VCs (older, larger, more experienced, and with stronger IPO track record) and VCs with broader networks exhibit less local bias. Staging and specialization in technology industries increase VCs’ local bias. We also find that the VC exhibits stronger local bias when it acts as the lead VC and when it is investing alone. Finally, we show that distance matters for the eventual performance of VC investments.

Keywords: home bias, venture capital

JEL Classification: G24, G31, G32, G28, G33, G34, G35, G38

Suggested Citation

Cumming, Douglas J. and Dai, Na, Local Bias in Venture Capital Investments (November 6, 2009). Journal of Empirical Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1501162

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Na Dai (Contact Author)

SUNY at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

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