Specialization and Competition in the Venture Capital Industry

Posted: 3 Nov 2011

See all articles by Yael V. Hochberg

Yael V. Hochberg

National Bureau of Economic Research (NBER); Rice University - Jesse H. Jones Graduate School of Business

Michael J. Mazzeo

Northwestern University - Kellogg School of Management

Ryan C. McDevitt

Fuqua Graduate School of Business - Duke University; Duke Innovation & Entrepreneurship Initiative

Date Written: October 27, 2011

Abstract

An important type of product differentiation in the VC market is industry specialization. We estimate a market structure model to assess competition among differentiated participants in the venture capital (VC) industry. The impacts of competitor presence on profits appear markedly different than in other industries with differentiated competitors. Consistent with the presence of network effects that soften competition, these patterns are concentrated in markets that exhibit dense organizational networks among incumbent VC firms. Markets with sparser incumbent firm networks, by contrast, exhibit competitive patterns that resemble those of other, non-networked industries.

Keywords: Competition, Specialization, Venture Capital, Product Differentiation, Networks

Suggested Citation

Hochberg, Yael V. and Mazzeo, Michael J. and McDevitt, Ryan C., Specialization and Competition in the Venture Capital Industry (October 27, 2011). Available at SSRN: https://ssrn.com/abstract=1953557 or http://dx.doi.org/10.2139/ssrn.1953557

Yael V. Hochberg (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Rice University - Jesse H. Jones Graduate School of Business ( email )

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Michael J. Mazzeo

Northwestern University - Kellogg School of Management ( email )

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United States
847-467-7551 (Phone)

Ryan C. McDevitt

Fuqua Graduate School of Business - Duke University ( email )

100 Fuqua Dr
Durham, NC 27708
United States

HOME PAGE: http://www.ryanmcdevitt.com

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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