NBER

Henry Chen, Paul Gompers, Anna Kovner, Josh Lerner

Bibliographic Information

NBER Working Paper No. 15102
Issued in June 2009
NBER Program(s):CF, PR

A non-technical summary of this paper is available in the October 2009 NBER Digest.  You can sign up to receive the NBER Digest by email.

Published: Chen, Henry, Paul A. Gompers, Anna Kovner, and Josh Lerner. "Buy Local? The Geography of Successful Venture Capital Expansion." Journal of Urban Economics 67, no. 1 (January 2010).

Available Formats

Abstract

We document geographic concentration by both venture capital firms and venture capital-financed companies in three cities - San Francisco, Boston, and New York. We find that firms open new satellite offices based on the success rate of venture capital-backed investments in an area. Geography is also significantly related to outcomes. Venture capital firms based in locales that are venture capital centers outperform, regardless of the stage of the investment. Ironically, this outperformance arises from outsized performance outside of the venture capital firms' office locations, including in peripheral locations. If the goal of state and local policy makers is to encourage venture capital investment, outperformance of non-local investments suggests that policy makers might want to mitigate costs associated with established venture capitalists investing in their geographies rather than encouraging the establishment of new venture capital firms

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