Handbook of Research on Venture Capital: Volume 2
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Handbook of Research on Venture Capital: Volume 2

A Globalizing Industry

  • Handbooks in Venture Capital series

Edited by Hans Landström and Colin Mason

This Handbook charts the development of venture capital research in light of the global financial crisis, starting with an analysis of the current venture capital market and the changing nature of the business angel market. Looking at governance structures; the performance of venture capitalists in terms of investments, economic impact and human capital; geographical organization of business angels and venture capital global ‘hotspots’; this book also analyses the current state of venture capital research and offers a roadmap for the future.
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Chapter 5: Venture capital firms: a human capital perspective

Dirk De Clercq and Dimo Dimov

Extract

Recent decades have been characterized by a wave of technological changes with profound social and economic impacts. Among the many contributors to the rapid increase in the extent and nature of technological innovations, we note the emergence and availability of venture capital to fund new ideas (Florida and Kenney, 1988; Hsu and Kenney, 2005; Kortum and Lerner, 2000). Venture capital allows entrepreneurs to explore the merits of various technologies, beyond the sometimes rigid confines of large corporations (Florida and Kenney, 1988), which means uncertain but interesting ideas can be tested in practice. The venture capital model, in which risky ideas receive funds in exchange for company ownership, has been immensely successful (Gompers and Lerner, 2001), and thus the venture capital (VC) industry has expanded not only in scale but also across borders, making VC a critical research topic. Early academic writing and practical discourse on VC has largely treated it as a homogeneous concept, with a focus on what venture capitalists typically do (Sahlman, 1990). Yet the proliferation of VC firms and the apparently wide disparity in their performance has prompted a new focus on understanding the factors that can explain such differences. Venture capital in these studies entails a human side, such as the role of partners’ human capital in investment processes and outcomes. Research has shown that variations in human capital can explain differences in both the types of investments VC firms make (for example Dimov et al., 2007) and the performance of those investments (for example Dimov and Shepherd, 2005). Research in this area is thus both important and vibrant.

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