Market Reputation, Innovation or Synergistic Partnerships, and Syndication Activities within Venture Capital Markets
47 Pages Posted: 9 Nov 2016 Last revised: 19 May 2021
Date Written: May 19, 2021
Abstract
Absent superior performance with respect to `Portfolio Innovation Focus' (PIF), formal theoretical predictions show `less experienced' (`competing') venture capitalists (VCs) - VCs who only coinvest with other less experienced VCs - become less reputable than alternate (same cohort) less experienced (`non-competing') VCs who coinvest with experienced VCs. Empirical results validate the theory, and existence of a single crossing property between PIF realizations for the two groups confirms dichotomy of preferences. The finding that highest ability non-competing VCs unequivocally outperform highest ability competing VCs indicates predication of syndication on `demand for expertise' Pareto dominates predication on quid-pro-quo benefits of syndicate size.
Keywords: Risk, Single Crossing, Experience, Diversification, Syndicate Size, Portfolio Innovation Focus
JEL Classification: G24; L14
Suggested Citation: Suggested Citation