Organizing Venture Capital: The Rise and Demise of American Research & Development Corporation, 1946-1973
51 Pages Posted: 8 Dec 2004
Date Written: December 1, 2004
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: Suggested Citation