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Working Paper | HBS Working Paper Series | 2017

And the Children Shall Lead: Gender Diversity and Performance in Venture Capital

by Paul A. Gompers and Sophie Q. Wang

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Abstract

With an overall lack of gender and ethnic diversity in the innovation sector documented in Gompers and Wang (2017), we ask the natural next question: Does increased diversity lead to better firm performances? In this paper, we attempt to answer this question using a unique dataset of the gender of venture capital partners’ children. First, we find strong evidence that parenting more daughters leads to an increased propensity to hire female partners by venture capital firms. Second, using an instrumental variable set-up, we also show that improved gender diversity, induced by parenting more daughters, improves deal and fund performances. These effects concentrate overwhelmingly on the daughters of senior partners than junior partners. Taken together, our findings have profound implications on how the capital markets could function better with improved diversity.

Keywords: Diversity; Gender; Venture Capital; Performance Improvement; Capital Markets;

Language: English Format: Print 63 pages SSRN Read Now

Citation:

Gompers, Paul A., and Sophie Q. Wang. "And the Children Shall Lead: Gender Diversity and Performance in Venture Capital." Harvard Business School Working Paper, No. 17-103, May 2017.

About the Author

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Paul A. Gompers
Eugene Holman Professor of Business Administration
Finance
Entrepreneurial Management

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More from the Author

  • Article | Journal of Financial Economics | January 2020

    How Do Venture Capitalists Make Decisions?

    Paul A. Gompers, William Gornall, Steven N. Kaplan and Ilya A. Strebulaev

    We survey 885 institutional venture capitalists (VCs) at 681 firms to learn how they make decisions across eight areas: deal sourcing, investment selection, valuation, deal structure, post-investment value-added, exits, internal firm organization, and relationships with limited partners. In selecting investments, VCs see the management team as more important than business-related characteristics such as product or technology. They also attribute more of the likelihood of ultimate investment success or failure to the team than to the business. While deal sourcing, deal selection, and post-investment value-added all contribute to value creation, the VCs rate deal selection as the most important of the three. We also explore (and find) differences in practices across industry, stage, geography, and past success. We compare our results to those for CFOs (Graham and Harvey 2001) and private equity investors (Gompers, Kaplan, and Mukharlyamov forthcoming).

    Keywords: Venture Capital; Value Creation; Capital Structure; Entrepreneurship; Decision Making;

    Citation:

    Gompers, Paul A., William Gornall, Steven N. Kaplan, and Ilya A. Strebulaev. "How Do Venture Capitalists Make Decisions?" Journal of Financial Economics 135, no. 1 (January 2020): 169–190.  View Details
    CiteView DetailsFind at Harvard Related
  • Course Overview Note | December 2019

    Introduction to Entrepreneurial Finance - 2020

    Paul A. Gompers

    Citation:

    Gompers, Paul A. "Introduction to Entrepreneurial Finance - 2020." Harvard Business School Course Overview Note 220-050, December 2019.  View Details
    CiteView Details Related
  • Case | HBS Case Collection | March 2018 (Revised October 2019)

    Yo-Yo Ma and Silkroad

    Rohit Deshpandé, Paul A. Gompers and Scott Duke Kominers

    Silkroad—a cross-cultural music collaboration that world-famous cellist Yo-Yo Ma had spearheaded since 1998, was preparing to celebrate its 20th anniversary. In parallel, Ma was stepping back from his role as the organization’s Artistic Director. Silkroad had come of age, gaining international recognition for its uniquely global music, which blended musical traditions from across the world—especially Asia, the Middle East, Europe, and America. The Ensemble had also forged strong partnerships with universities, local governments, and civic groups and developed an array of outreach programs to help people understand and express themselves through music. Ma was confident that there could be no better time to hand over leadership. But the transition was bittersweet: He felt a deep personal connection both to the Ensemble as a whole and to every one of its performers and staff members. And he wondered how reducing his involvement would affect the organization’s sustainability.

    Keywords: Managing diverse teams; Leadership transitions; Global innovation; nonprofit organizations; music; Cultural Entrepreneurship; Nonprofit Organizations; Music Entertainment; Leadership; Transition;

    Citation:

    Deshpandé, Rohit, Paul A. Gompers, and Scott Duke Kominers. "Yo-Yo Ma and Silkroad." Harvard Business School Case 818-110, March 2018. (Revised October 2019.)  View Details
    CiteView DetailsEducatorsPurchase Related
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