The role of venture capitalists in financing and developing high-technology start-ups

This dissertation addresses the interaction between venture capitalists (VCs) and start-up development through three essays. A common theme is that VCs serve important extra-financial and information brokering roles. In the first essay, using the setting of entrepreneurs obtaining financing from VCs, I empirically evaluate a market for affiliation with prominent partners. I hypothesize that the price for association is increasing in the prominence of the affiliation partner. By assembling a novel sample of start-ups with multiple financing offers, I analyze offers made by competing VCs at the first professional round of funding, holding characteristics of the start-up fixed. The estimated effects are economically significant, with a doubling of a VC's industrial deal experience in a start-up's industry, for example, associated with a six to nineteen percent discount in price paid to acquire start-up equity. The second essay, co-authored with Joshua Gans and Scott Stem, explores the determinants of commercialization strategy for start-up innovators by examining whether start-ups earn their returns to innovation through product market competition as opposed to cooperation with more established firms (either through licensing, strategic alliances or outright acquisition). Three variables in the start-up's commercialization environment affect the relative returns to a cooperative commercialization strategy: (a) the control of intellectual property rights (IPR), (b) low transaction costs, and (c) the cost of sunk assets associated with product market entry.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2001

Author dc:creator

• Hsu, David H

Advisor dc:contributor.advisor

• Scott Stern.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/8248

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/8248