Learning by Investing: Entrepreneurial Spillovers from Venture Capital

Josh Lerner, Jinlin Li and Tong Liu

No 31897, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies how investing in venture capital (VC) affects the entrepreneurial outcomes of individual limited partners (LPs). Using comprehensive administrative data on entrepreneurial activities and VC fundraising and investments in China, we first document that individual LPs, on average, contribute about 50% of the capital of each fund in which they participate, and over 50% of them are entrepreneurs. We then exploit an identification strategy by comparing the entrepreneurial outcomes of individual LPs in funds that eventually launched with those in funds that failed to launch. The fraction of committed capital from corporate LPs in industries that subsequently encounter poor returns is used as an instrument for funds’ launch failures. We find that after investing in a successfully launched VC fund, individual LPs create significantly more ventures than do LPs in funds which failed to launch. These new ventures tend to be high-tech firms and file more patents than do the LPs’ prior ventures. We find evidence consistent with venture investments being a channel through which individual LPs learn.

JEL-codes: D83 G23 G24 L25 L26 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-cna, nep-ent and nep-sbm
Note: CF PR
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w31897.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
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: https://EconPapers.repec.org/RePEc:nbr:nberwo:31897

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31897
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().