Specialization and Competition in the Venture Capital Industry

Specialization and Competition in the Venture Capital Industry An important type of product differentiation in the venture capital (VC) market is industry specialization. We estimate a market structure model to assess competition among VCs—some of which specialize in a particular industry and others of which are generalists—and find that the incremental effect of additional same-type competitors increases as the number of same-type competitors increases. Furthermore, we find that the effects of generalist VCs on specialists are substantial, and larger than the effect of same-type competitors. Estimates from other industries typically show the incremental effects falling as the number of same-type competitors increases and the effects of same-type competitors as always being larger than the effects of different-type competitors. Consistent with the presence of network effects that soften competition, these patterns are more pronounced in markets that exhibit dense organizational networks among incumbent VCs. Markets with sparser incumbent networks, by contrast, exhibit competitive patterns that resemble those of other, non-networked industries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Specialization and Competition in the Venture Capital Industry

Loading next page...
 
/lp/springer_journal/specialization-and-competition-in-the-venture-capital-industry-VC7iwBQJQS
Publisher
Springer Journals
Copyright
Copyright © 2015 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-015-9462-3
Publisher site
See Article on Publisher Site

Abstract

An important type of product differentiation in the venture capital (VC) market is industry specialization. We estimate a market structure model to assess competition among VCs—some of which specialize in a particular industry and others of which are generalists—and find that the incremental effect of additional same-type competitors increases as the number of same-type competitors increases. Furthermore, we find that the effects of generalist VCs on specialists are substantial, and larger than the effect of same-type competitors. Estimates from other industries typically show the incremental effects falling as the number of same-type competitors increases and the effects of same-type competitors as always being larger than the effects of different-type competitors. Consistent with the presence of network effects that soften competition, these patterns are more pronounced in markets that exhibit dense organizational networks among incumbent VCs. Markets with sparser incumbent networks, by contrast, exhibit competitive patterns that resemble those of other, non-networked industries.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Apr 9, 2015

References

  • Differentiation and competition in HMO markets
    Dranove, D; Gron, A; Mazzeo, MJ
  • Specialization and success: Evidence from venture capital
    Gompers, P; Kovner, A; Lerner, J

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off