Does venture capital pay off? a meta-analysis on the relationship between venture capital involvement and firm performance

Nina Rosenbusch, V. Muller

Research output: Contribution to journalConference Contribution

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Abstract

Venture capital (VC) as an alternative to mainstream corporate finance (Wright and Robbie, 1998) has attracted a large amount of interest in academic research and among practitioners. On e of the main questions is whether VC adds value to firms. Yet, empirical research results are highly inconsistent. Venture capitalists do not only provide capital and monitoring, but also actively assist firms with industry-specific knowledge and skills (MacMillan et al., 1989). Furthermore,
they increase the legitimacy of entrepreneurial firms (Zimmerman & Zeitz, 2002). On the other hand, venture capitalists may pressure firms to an initial public offering (IPO) in a premature stage of their life cycle (Gompers, 1996). High costs associated with an IPO may, in turn, decrease profitability and even endanger the survival of firms. Whether venture capital really pays off, thus, largely depends on contextual factors. The aim of this study is to provide a review and synthesis of existing empirical research on the relationship between VC and firm performance. Specifically, we intend to answer two research questions: (1)
Does VC increase the performance of firms? (2) Which variables moderate this relationship?
Original languageEnglish
Article number8
Number of pages2
JournalFrontiers of Entrepreneurship
Volume30
Issue number3
Publication statusPublished - 2010
EventBabson College Entrepreneurship Research Conference 2009 - Babson College, Wellesley, United States
Duration: 1 Jan 2009 → …
http://www.babson.edu/Academics/centers/blank-center/bcerc/Pages/previous-conferences.aspx

Keywords

  • entrepreneur
  • venture capital
  • firm performance
  • pay off
  • meta-analysis
  • relationship

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