Journal article
Competition in the venture capital market and the success of startup companies: Theory and evidence
Journal of economics & management strategy, v 29(4), pp 741-791
01 Oct 2020
Abstract
We examine the effect of a competitive supply of venture capital (VC) on the exits (initial public offering or mergers and acquisitions) of startups. We develop a matching model with double-sided moral hazard, and identify a novel differential effect of VC competition on the success of startups. Using VC data, we find evidence for this differential effect. For example, when the VC market becomes more competitive (Herfindahl-Hirschman Index decreases by 50% from its mean of 0.08), the absolute likelihood of success increases by 2.8% for startups backed by less experienced VC firms, but it decreases by 3.6% for startups backed by the most experienced VC firms.
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Details
- Title
- Competition in the venture capital market and the success of startup companies: Theory and evidence
- Creators
- Suting Hong - ShanghaiTech UniversityKonstantinos Serfes - Drexel UniversityVeikko Thiele - Queen's University
- Publication Details
- Journal of economics & management strategy, v 29(4), pp 741-791
- Publisher
- Wiley
- Number of pages
- 51
- Grant note
- LeBow Dean's Fellowship for R&R for the 2019-2020 academic year ShanghaiTech University Startup Fund
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000555691400001
- Scopus ID
- 2-s2.0-85088807588
- Other Identifier
- 991019168733804721
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics
- Management