Investor Horizon and the Life Cycle of Innovative Firms: Evidence from Venture Capital

• 成果类型: Article
• 署名作者: Barrot, Jean-Noel
• 署名单位: Massachusetts Institute of Technology (MIT); Center for Economic & Policy Research (CEPR)
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2482
• 发表日期: 2017
• 页码: 3021-3043
• 关键词: finance; INNOVATION; venture capital; entrepreneurship; Investor horizon

摘要

This paper studies whether and how the contractual horizon of venture capital funds affects their investments in innovative firms. I find that funds with a longer remaining horizon select younger companies at an earlier stage of their development, which grow their patent stock significantly more than companies financed by funds with a shorter horizon. The sensitivity of investment decisions to horizon is stronger among experienced venture capital firms, who allocate investments across a larger number of fund vintages. Finally, I find that the interaction of funds' fixed horizon with their option-like compensation structure affects their investment decisions: when early performance has been high, fund managers target less innovative companies. These findings shed light on the drivers of venture capital investment decisions and on their implications for the type of companies that receive venture capital financing.