Organizing Venture Capital: The Rise and Demise of American Research & Development Corporation, 1946-1973

51 Pages Posted: 8 Dec 2004

See all articles by David H. Hsu

David H. Hsu

University of Pennsylvania - Management Department

Martin Kenney

University of California, Davis

Date Written: December 1, 2004

Abstract

While venture capital (VC) has become an important element of the 20th century U.S. innovation system, few studies have systematically examined the origins and evolution of this financial institution. We take a step in this direction by analyzing the evolution of the early and influential VC firm, American Research & Development Corporation (ARD), in the period that it was independent from 1946-1973. We place the creation and subsequent evolution of ARD within its historical context and show how it was an innovation by Boston-area civic elites. Using new historical data, we examine the evolution of ARD's practices over time. We argue that ARD's funding model constrained its functioning as a venture capital firm and contributed to its demise. ARD was a pioneering organization whose business model ultimately failed as a newer organizational model, the limited partnership, was created and had a better fit with the business environment. Nevertheless, ARD has had a lasting imprint on the practice of modern venture capital.

Keywords: Venture capital, entrepreneurship, organizational evolution, business history

JEL Classification: M13, N22, O32, G20

Suggested Citation

Hsu, David H. and Kenney, Martin, Organizing Venture Capital: The Rise and Demise of American Research & Development Corporation, 1946-1973 (December 1, 2004). Available at SSRN: https://ssrn.com/abstract=628661 or http://dx.doi.org/10.2139/ssrn.628661

David H. Hsu (Contact Author)

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
215-746-0125 (Phone)
215-898-0401 (Fax)

Martin Kenney

University of California, Davis ( email )

Community and Regional Development Unit
Davis, CA 95616
United States
5305745943 (Phone)

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