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Firm experience and market entry by venture capital firms (1962-2004)

Author

Listed:
  • Dimo Dimov

    (UCONN - University of Connecticut)

  • Pablo Martin de Holan

    (Instituto de Empresa Business School, INCAE Business School - INCAE Business School)

Abstract

In this paper, we examine a firm's decision to enter new markets as related to the depth and breadth of its experience and the relative distance of those markets. We situate our discussion and analysis in the context of the venture capital (VC) industry, and examine whether and when US VC firms enter five high-technology investment markets through firstor later-round investments. This setting allows us to observe both the firms that chose to enter a new market and those that did not, and analyse the antecedents of these decisions. We find that VC firms overall are less likely to enter distant markets; those with broader experience are more likely to make first-round entries. In addition, VC firms with deeper investment experience are more likely to make first-round entries in proximate markets and less likely to enter distant markets and make later-round entries. These results offer interesting implications for the literature on organizational learning and entrepreneurship.

Suggested Citation

  • Dimo Dimov & Pablo Martin de Holan, 2010. "Firm experience and market entry by venture capital firms (1962-2004)," Post-Print hal-02312929, HAL.
    • Handle: RePEc:hal:journl:hal-02312929
    DOI: 10.1111/j.1467-6486.2009.00869.x
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    Cited by:

    1. Xiao Hu & Jiayi Wang & Banggang Wu & Taiyang Zhao, 2022. "Specialist or new entrant: Who is the ideal investor for a new venture?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2055-2065, September.
    2. Elisabet Garrido & Claudio Giachetti & Juan P. Maicas, 2023. "Navigating windows of opportunity: The role of international experience," Strategic Management Journal, Wiley Blackwell, vol. 44(8), pages 1911-1938, August.
    3. Tumasjan, Andranik & Braun, Reiner & Stolz, Barbara, 2021. "Twitter sentiment as a weak signal in venture capital financing," Journal of Business Venturing, Elsevier, vol. 36(2).
    4. Kim Claes & Balagopal Vissa, 2020. "Does Social Similarity Pay Off? Homophily and Venture Capitalists’ Deal Valuation, Downside Risk Protection, and Financial Returns in India," Organization Science, INFORMS, vol. 31(3), pages 576-603, May.

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