Spatial Proximity in Venture Capital Financing : A Theoretical and Empirical Analysis of Germany

Marko Bender analyzes the impact of spatial proximity between venture capitalists and new ventures throughout the investment process. He elaborates a comprehensive theoretical framework and empirically validates resulting hypotheses concerning the observed spatial proximity and the impact of spatial proximity on the likelihood of a venture capital investment using a German dataset. A thorough discussion of results and resulting implications for entrepreneurs, venture capitalists, and public policy concludes this thesis. Cover......Page 1 Entrepreneurial and Financial Studies......Page 4 Spatial Proximity in Venture Capital Financing......Page 5 ISBN 9783834926845......Page 6 Acknowledgments......Page 8 Table of Contents......Page 10 List of Figures......Page 14 List of Tables......Page 16 List of Abbreviations......Page 18 List of Symbols......Page 20 1.1 Problem and Aims of Analysis......Page 22 1.2 Research Methodology......Page 26 1.3 Outline of the Thesis......Page 28 2.1 Venture Capital Financing 2.1.1 Definition of Venture Capital......Page 32 2.1.2 Characteristics of Portfolio Companies......Page 35 2.1.3 Characteristics of German Venture Capitalist Types......Page 36 2.1.3.1 Private Venture Capitalists......Page 38 2.1.3.2 (Quasi-)public Venture Capitalists......Page 39 2.1.4 Venture Capital Investment Process......Page 42 2.1.4.1 Deal Origination......Page 43 2.1.4.2 Deal Screening......Page 47 2.1.4.3 Deal Due Diligence......Page 49 2.1.4.4 Deal Structuring......Page 53 2.1.4.5 Investment Development......Page 56 2.1.4.6 Investment Exit......Page 59 2.2 Spatial Proximity 2.2.1 Definition of Spatial Proximity......Page 62 2.2.2 Spatial Distribution of Venture Capitalists and Venture Capital Investments......Page 63 2.2.3 First Implications Regarding the Role of Spatial Proximity in Venture Capital Financing......Page 65 2.3 Overview of Relevant Literature......Page 67 general studies......Page 68 observed patterns in spatial prox-imity between venture capitalists and portfolio companies.......Page 69 impact of spatial proximity on the likelihood of a VC investment.......Page 71 impact of spatial prox-imity on specific aspects of VC transactions.......Page 72 3.1 Identification of Relevant Theories......Page 82 3.2 Theories Relevant to the Venture Capitalist Entrepreneur Dyad 3.2.1 New Institutional Economics as Starting Point......Page 87 3.2.1.1 Property Rights Theory......Page 89 3.2.1.2 Agency Theory......Page 92 3.2.1.3 Transaction Cost Theory......Page 109 3.2.2.1 Game Theory......Page 115 3.2.2.2 Stewardship Theory......Page 123 3.2.2.3 Social Exchange Theory......Page 130 3.3 Theories Relevant beyond the Venture Capitalist Entrepreneur Dyad: Network Approach......Page 137 3.3.1 Theoretical Foundations......Page 138 3.3.1.1 Approach of Inter-Organizational Networks......Page 140 3.3.1.2 Formal Network Analysis......Page 143 3.3.2 Relevant Networks......Page 145 3.3.3 Implications of Spatial Proximity between Actors......Page 151 3.4 Summary......Page 152 4 Impact of Spatial Proximity throughout the Venture Capital Investment Process......Page 154 4.1.1 Deal Origination......Page 156 4.1.2 Deal Screening......Page 162 4.1.3 Deal Due Diligence......Page 166 4.1.4 Deal Structuring......Page 174 4.2.1.1 Monitoring......Page 175 4.2.1.2 Support......Page 180 4.2.2 Investment Exit......Page 189 4.3 Summary and Testable Hypotheses......Page 195 4.3.1 General Impact of Distance......Page 196 4.3.2 New Venture Characteristics......Page 199 4.3.3 Venture Capitalist Characteristics......Page 202 4.3.4 Investment Round Characteristics......Page 206 5 Empirical Analysis of Relationships between Spatial Proximity and the Type and Likelihood of Venture Capital Financing......Page 208 5.1.1 Available Datasets for Analysis......Page 209 5.1.2 Used Dataset......Page 210 5.1.3.1 Spatial Proximity......Page 216 5.1.3.2 New Venture Characteristics......Page 217 5.1.3.3 Venture Capitalist Characteristics......Page 220 5.1.3.4 Investment Round Characteristics......Page 223 5.1.3.5 Control Variables......Page 225 5.1.4 Summary Statistics......Page 227 5.1.5 Possible Selection Biases......Page 229 5.2.1 Empirical Strategy to Investigate Patterns in Spatial Proximity......Page 235 5.2.2 First Bivariate Analyses......Page 238 5.2.3 Ordered Logistic Regressions......Page 243 5.2.4 Robustness Tests of Conducted Analyses......Page 256 5.2.5 Limitations of Analyses......Page 257 5.3.1 Empirical Strategy to Investigate the Likelihood of a Venture Capital Investment......Page 259 5.3.2 Rare Event Logistic Regressions......Page 266 5.3.3 Robustness Tests of Conducted Analyses......Page 293 5.3.4 Limitations of Analyses......Page 294 5.4 Summary of Results and Discussion......Page 295 6 Conclusion......Page 306 6.1 Summary of Results......Page 307 6.2 Implications of the Impact of Spatial Proximity on Venture Capital Financing 6.2.1 Implications for Entrepreneurs......Page 312 6.2.2 Policy Implications......Page 314 6.2.3 Implications for Venture Capitalists......Page 317 6.3 Further Research and Outlook......Page 318 Appendix A Definitions from VentureSource......Page 320 B Appendix – Description of Dataset......Page 322 C Appendix – Patterns in Spatial Proximity......Page 323 D Appendix – Likelihood of a Venture Capital Investment......Page 336 References......Page 352