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Geographic distance between venture capitalists and target firms and the value of quality signals
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Kolympiris, Christos, Hoenen, Sebastian and Kalaitzandonakes, Nicholas (2018) Geographic distance between venture capitalists and target firms and the value of quality signals. Industrial and Corporate Change, 27 (1). pp. 189-220. doi:10.1093/icc/dtw057
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Official URL: http://dx.doi.org/10.1093/icc/dtw057
Abstract
In this paper, we examine whether the value of quality signals (patent activity and founding team characteristics) transmitted by emerging biotechnology firms is influenced by the geographic distance between venture capitalists and biotechnology firms. In line with the notion that signals are more valuable to receivers in environments of elevated information asymmetries and under the premise that long-distance transactions present such an environment, we empirically reveal that patent activity and founding team entrepreneurial experience are more effective in increasing venture capital investments when the distance between investors and investees is elevated. Our results, therefore, corroborate the rationale that because tacit knowledge circulates mostly within local circles, it diminishes the value of signals for local transactions, as a priori knowledge about potential target firms is more easily assessed by investors. Our study contributes to the literature on the factors that drive the value of signals, on the literature that studies the function of patents and other forms of intellectual property as a means to boost firm performance, and on the literature on the geography of venture capital investments.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HG Finance | ||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Entrepreneurship, Innovation & Management Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Biotechnology industries, Venture capital, Patents -- Economic aspects | ||||||||
| Journal or Publication Title: | Industrial and Corporate Change | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 0960-6491 | ||||||||
| Official Date: | 1 February 2018 | ||||||||
| Dates: |
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| Date of first compliant deposit: | 15 August 2018 | ||||||||
| Volume: | 27 | ||||||||
| Number: | 1 | ||||||||
| Page Range: | pp. 189-220 | ||||||||
| DOI: | 10.1093/icc/dtw057 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Publisher Statement: | This is a pre-copyedited, author-produced version of an article accepted for publication in Industrial and Corporate Change following peer review. The version of record is available online at: http://dx.doi.org/10.1093/icc/dtw057 | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| RIOXX Funder/Project Grant: |
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