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Does Competition Kill Ties?

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  • Richard Kum-yew Lai

    (Harvard Business School)

Abstract

Venture capital firms (VCs) form syndicates that compete to invest in deals. Does more competition makes it less likely that VCs will choose syndicate partners based on past ties? Using over 200,000 observations on how VCs choose each other in 572 biotech deals in Massachussetts from 1967 through 2004, I find the answer is: yes. The theory of embeddedness argues that past ties can explain the pattern of who works with who. I interpret my finding as a first step in demarcating when embeddedness might apply and when atomistic, calculative, economic forces might be a better explanation of who works with who.

Suggested Citation

  • Richard Kum-yew Lai, 2005. "Does Competition Kill Ties?," Others 0509001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpot:0509001
    Note: Type of Document - pdf; pages: 30
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    References listed on IDEAS

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    Cited by:

    1. Mares Vlad & Shor Mikhael, 2012. "On the Competitive Effects of Bidding Syndicates," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-33, September.

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    More about this item

    Keywords

    economics of sociology; embeddedness; venture capital; ties; competition;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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