45 Pages Posted: 15 Dec 2015
Date Written: April 16, 2014
We show that venture capitalists’ (VCs) on-site involvement with their portfolio companies leads to an increase in (1) innovation and (2) the likelihood of a successful exit. We rule out selection effects by exploiting an exogenous source of variation in VC involvement: the introduction of new airline routes that reduce VCs’ travel times to their existing portfolio companies. We confirm the importance of this channel by conducting a large-scale survey of VCs, of whom almost 90% indicate that direct flights increase their interaction with their portfolio companies and management, and help them better understand companies’ activities.
Keywords: Venture Capital, Monitoring, Innovation, Agglomeration
JEL Classification: D81, G24, L26, O31, O32
Suggested Citation: Suggested Citation
Bernstein, Shai and Giroud, Xavier and Townsend, Richard R., The Impact of Venture Capital Monitoring (April 16, 2014). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2341329 or http://dx.doi.org/10.2139/ssrn.2341329