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Exchanges of innovation resources inside venture capital portfolios

Juanita González-Uribe

Journal of Financial Economics, 2020, vol. 135, issue 1, 144-168

Abstract: I explore the prevalence of exchanges of innovation resources inside venture capital portfolios. I show that after companies join investors’ portfolios, several proxies of exchanges between them and portfolio companies (relative to matched nonportfolio companies) increase by an average of 60%. The increase holds when joining events are plausibly exogenous and when VCs’ bargaining power and potential conflicts of interest are low. Three novel mechanisms are supported: carve-outs, spawning, and recycling, whereby entrepreneurs divest innovation units, start new ventures, and reuse assets in other portfolio companies, respectively. Results suggest that returns to innovation are higher in venture capital portfolios.

Keywords: Venture capital portfolios; Innovation resources; State pension funds (search for similar items in EconPapers)
JEL-codes: G24 G32 O31 O34 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jfineco.2019.05.017

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