Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation

Michael J. Fritsch · Dirk Schilder

125 citations0/0 files storedEnvironment and Planning A Economy and Space

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Private Equity and Venture Capital Entrepreneurship Studies and Influences Regional Economics and Spatial Analysis

Abstract

We examine the role of spatial proximity for venture capital (VC) investments in Germany. The main database is a survey of seventy-five personal interviews with representatives of different types of financial institutions. The analysis shows that spatial proximity is much less important for VC investments than is often believed. The results indicate that telecommunication cannot be regarded as a means of overcoming the problems of geographical distance. We find that VC suppliers frequently syndicate investments in distant portfolio firms with partners who are more closely located. The age of the portfolio firm does not affect the importance of spatial proximity. On the whole, regional proximity is not a dominant factor in VC partnerships.

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References

1994A Dynamic Theory of Organizational Knowledge Creation 1994“Sticky Information” and the Locus of Problem Solving: Implications for Innovation 1990The structure and governance of venture-capital organizations 1995Optimal Investment, Monitoring, and the Staging of Venture Capital 2001The Venture Capital Revolution 2001Syndication Networks and the Spatial Distribution of Venture Capital Investments 1995Venture Capitalists and the Oversight of Private Firms 1996Venture capitalist governance and value added in four countries

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