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  • Journal of Economics & Management Strategy

Specialization and Success: Evidence from Venture Capital

By: Paul A. Gompers, Anna Kovner and Josh Lerner
  • Format:Print
  • | Pages:28
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Abstract

This paper examines how organizational structure affects behavior and outcomes, studying the performance of different types of venture capital organizations. We find a strong positive relationship between the degree of specialization by individual venture capitalists at a firm and its success. When the individual investment professionals are highly specialized themselves, the marginal effect of increasing overall firm specialization is much weaker. The poorer performance by generalists appears to be due to both an inefficient allocation of funding across industries and poor selection of investments within industries. Venture capital organizations with more experience tend to outperform those with less experience.

Keywords

Experience and Expertise; Venture Capital; Organizational Structure; Outcome or Result; Performance Effectiveness; Behavior; Financial Services Industry

Citation

Gompers, Paul A., Anna Kovner, and Josh Lerner. "Specialization and Success: Evidence from Venture Capital." Journal of Economics & Management Strategy 18, no. 3 (Fall 2009): 817–844.
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About The Authors

Paul A. Gompers

Finance
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Josh Lerner

Entrepreneurial Management
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More from the Authors
  • The Market for CEOs: Evidence from Private Equity By: Paul A. Gompers, Steven N. Kaplan and Vladimir Mukharlyamov
  • Financial Acquisitions By: Josh Lerner, Amit Seru and Jennifer Zou
  • The Globalization of Silicon Valley: The Dynamics of Start-Up Diffusion By: Josh Lerner, Jacob Moscona and David Yang
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