A Knowledge-Based View of Venture Capital Firms’ Portfolio Investment Specialization and Syndication
15 Pages Posted: 25 Mar 2011
Date Written: 2003
Using a knowledge-based perspective, we examine determinants of outcomes of venture capital investments. We focus on the effects on investment performance of venture capital firms’ (VCFs’) (1) specialization in terms of industry and development stage and (2) involvement in investment syndicates. We test our hypotheses based on a longitudinal data set of realized strategies of 200 U.S.-based VCFs over a twelve-year period. We find that investment specialization in terms of industry and development stage has a positive effect on performance. We also find that whereas the degree of syndication at the initial investment round negatively affects investment performance, the total involvement by the investment syndicate over time has a positive impact on performance. Finally, we find support for both knowledge-based and financial arguments for why VCFs engage in syndication.
JEL Classification: M13
Suggested Citation: Suggested Citation