The Emergent properties of a new financial market: American venture capital syndication from 1960 to 2004
Author: Kogut, Bruce ; Urso, Pietro ; Walker, GordonINSEAD Area: Strategy Series: Working Paper ; 2006/26/ST Publisher: Fontainebleau : INSEAD, 2006.Language: EnglishDescription: 46 p. + annexes.Type of document: INSEAD Working Paper Online Access: Click here Abstract: The history of transactions of venture capital investments permits a direct examination of the Braudel hypothesis that regional markets evolve dynamically and interdependently in reference to a global system. These transactions consist of investments in new companies - both by individual venture capital firms and by venture capital syndicates in which two or more venture capitalists invest in a common target. Using methods of graph analysis, we analyze 159,561 transactions over nearly 45 years to demonstrate the rapid emergence of a deep structure in the network of syndications. A giant component emerges early in the history of the industry which subsumes the regional and sectoral sub-graphs. An analysis of the data points to the pursuit of simple strategies that trade off the preservation of ties to trusted expert partners against the search for new investments through regional and sectoral diversification by the formation of new ties. While incumbent firms prefer transacting with past partners, diversification into new geographies and sectors leads to forming ties with new venture capital firms, hence generating the dynamics that lead to an integrated national market by balancing trusted expertise with the search for new opportunities.| Item type | Current location | Collection | Call number | Status | Date due | Barcode | Item holds |
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Digital Library | Available | BC007460 |
The history of transactions of venture capital investments permits a direct examination of the Braudel hypothesis that regional markets evolve dynamically and interdependently in reference to a global system. These transactions consist of investments in new companies - both by individual venture capital firms and by venture capital syndicates in which two or more venture capitalists invest in a common target. Using methods of graph analysis, we analyze 159,561 transactions over nearly 45 years to demonstrate the rapid emergence of a deep structure in the network of syndications. A giant component emerges early in the history of the industry which subsumes the regional and sectoral sub-graphs. An analysis of the data points to the pursuit of simple strategies that trade off the preservation of ties to trusted expert partners against the search for new investments through regional and sectoral diversification by the formation of new ties. While incumbent firms prefer transacting with past partners, diversification into new geographies and sectors leads to forming ties with new venture capital firms, hence generating the dynamics that lead to an integrated national market by balancing trusted expertise with the search for new opportunities.
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