Does Competition Kill Ties?

36 Pages Posted: 14 Mar 2005

See all articles by Richard K. Lai

Richard K. Lai

The Wharton School, Univ. of Pennsylvania

Date Written: March 28, 2005

Abstract

Venture capital firms (VCs) form syndicates that compete to invest in deals. Does more competition makes it less likely that VCs will choose syndicate partners based on past ties? Using over 200,000 observations on how VCs choose each other in 572 biotech deals in Massachussetts from 1967 through 2004, I find the answer is: yes. The theory of embeddedness argues that past ties can explain the pattern of who works with who. I interpret my finding as a first step in demarcating when embeddedness might apply and when atomistic, calculative, economic forces might be a better explanation of who works with who.

Keywords: embeddedness, venture capital, ties, competition

JEL Classification: G24

Suggested Citation

Lai, Richard K., Does Competition Kill Ties? (March 28, 2005). Available at SSRN: https://ssrn.com/abstract=676946 or http://dx.doi.org/10.2139/ssrn.676946

Richard K. Lai (Contact Author)

The Wharton School, Univ. of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215 898 1630 (Phone)

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