Manager Networks and Coordination of Effort: Evidence from Venture Capital Syndication
41 Pages Posted: 20 Nov 2011 Last revised: 22 Mar 2013
Date Written: March 20, 2013
I explore whether educational connections between managers of venture capital (VC) firms can alleviate coordination costs, and thereby enhance collaboration, when engaging in economic ties with other organizations. Two given VC firms are three times as likely to syndicate an investment together if their managers overlapped at an educational institution, and their subsequent investments are associated with better investment outcomes, as measured by IPO exit. The effects are stronger in early-stage investments, in larger syndicates and for those VC firm-pairs syndicating with each other for the first time, and do not appear to be driven by manager latent talent. The mechanism for increased performance in the network is through a reduction in coordination costs, enhancing collaboration between the two parties.
Keywords: venture capital, manager networks, syndication
JEL Classification: G24, G30
Suggested Citation: Suggested Citation