Economics at your fingertips  

Competition in the venture capital market and the success of startup companies: Theory and evidence

Suting Hong, Konstantinos Serfes () and Veikko Thiele

Journal of Economics & Management Strategy, 2020, vol. 29, issue 4, 741-791

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.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: Competition in the Venture Capital Market and the Success of Startup Companies: Theory and Evidence (2020) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2021-06-10
Handle: RePEc:bla:jemstr:v:29:y:2020:i:4:p:741-791