Venture capital investment: the role of predator-prey dynamics with learning by doing

James Brander and Jean-Etienne de Bettignies

Economics of Innovation and New Technology, 2009, vol. 18, issue 1, 1-19

Abstract: This paper suggests that endogenous dynamics of the 'predator-prey' type can provide a contributing explanation for both high-venture capital concentration by industry and 'boom and bust' industry-level investment dynamics. We propose a model based on the idea that venture capitalists favor industries where they have significant experience and industries with a large pool of good investment opportunities. However, investment 'uses up' opportunities and therefore tends to deplete the pool of unexploited opportunities. The resulting industry-level interactive dynamics naturally give rise to venture capital investment cycles similar to observed patterns.

Keywords: venture capital; dynamics; predator-prey; concentration; learning (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (6)

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DOI: 10.1080/10438590701530066

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