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Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation

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  • Michael Fritsch
  • Dirk Schilder

Abstract

We examine the role of spatial proximity for Venture Capital (VC) investments in Germany. The main database is a survey of 85 personal interviews with representatives of different types of financial institutions. The analysis shows that spatial proximity is far less important for VC investments than is often believed. For example, the results indicate that syndication is partly used as an alternative to spatial proximity. Telecommunication does not work as a substitute for face-to-face contact. On the whole, regional proximity is not a dominant factor in VC partnerships. Therefore, the absence of VC firms in a region does not appear to cause a severe regional equity gap.

Suggested Citation

  • Michael Fritsch & Dirk Schilder, 2006. "Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation," Papers on Entrepreneurship, Growth and Public Policy 2006-14, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    • Handle: RePEc:esi:egpdis:2006-14
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    More about this item

    Keywords

    Venture Capital; spatial proximity; start-up financing;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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