Working Paper: NBER ID: w11350
Authors: Antonio Gledson de Carvalho; Charles W. Calomiris; Joo Amaro de Matos
Abstract: Venture capitalists add value to portfolio firms by obtaining and transferring information about senior managers across firms over time. Information transfer occurs on a significant scale and takes place both among a single venture capitalist's portfolio firms and between different venture capitalists' firms via a network of venture capitalists, which venture capitalists use to locate and relocate managers.\n\tCross-sectional differences are associated with differences in the intensity with which venture capitalists network. The observable factors relevant in explaining the intensity with which venture capitalists network include: 1) the value of the information transmitted through the network, 2) the riskiness of the activities of portfolio firms, 3) the size of the venture capital fund, 4) the degree of difficulty in enticing executives to manage portfolio firms, and 5) the reputation of the venture capitalist for successfully recycling managers. These factors reflect costs and benefits to venture capitalists of participating in the network.
Keywords: No keywords provided
JEL Codes: G14; G24; J23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Venture capitalists' human resource management capabilities (M13) | Value added to portfolio firms (G32) |
| Riskiness of portfolio firms (G32) | Comparative advantage of venture capitalists in recruiting management (G24) |
| Value of information transmitted through networks (D85) | Comparative advantage of venture capitalists in recruiting management (G24) |
| Size of the venture capital fund (G24) | Comparative advantage of venture capitalists in recruiting management (G24) |
| Reputation of the venture capitalist (G24) | Comparative advantage of venture capitalists in recruiting management (G24) |
| Venture capitalists' networking activities (G24) | Improved abilities in attracting managers (M51) |
| Subjective risk attributed to investments (G11) | Extent of venture capitalists acting as human resource managers (G24) |
| Perceived difficulty in recruiting managers (M51) | Extent of venture capitalists acting as human resource managers (G24) |
| Venture capitalists' ability to network and transfer information about senior managers (G24) | Recruiting high-level talent (M51) |
| Venture capitalists providing employment safety net for managers (G24) | Reducing risk aversion of potential candidates (D79) |