Venture Capital, High Technology and Regional Development

Abstract

Examines the regional dimensions of the venture capital industry. First providing an overview of the venture capital industry and an analysis of the empirical literature, regional characteristics of the industry are then presented - focusing especially on California, New York, Boston, and Chicago, and including location, regional flow of funds, and patterns of investment. Venture capital firms tend to cluster around established financial centers and technology regions. Venture capital firms in New York and Chicago are financially based and export-oriented, while California is more integrated and indigenously focused, and Boston is a hybrid of these. Further, a symbiotic relationship exists between finance and technology-oriented venture capital, since financial firms are able to participate in investments to a greater extent because of the elaborate venture capital networks surrounding high-technology regions. Venture capital firms show a high level of agglomeration, especially because of the information intensive nature of the industry, with its reliance on personal networks, and the desire by investors for proximity to portfolio firms. The development of a successful technology infrastructure through venture capital will play a larger role in building up technology centers than will government intervention based on public venture capital. (CJC)

Keywords: Financial centers, Venture capital, Social structures, High technology firms, Clusters, Firm location, Venture capital firms, Agglomeration economies, Technology clusters, Regional development, Location factors, Social networks, Financial services industry, Technology innovation