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Selected Publications 2002
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R. Amit, J. Brander and W. Antweiler, "Venture Capital Syndication: Improved Venture Selection versus the
Value-Added Hypotheses", 2002, Journal of Economics and Management Strategy, 11
(Fall) pp. 423-451.
Abstract:
Syndication arises when venture capitalists jointly invest in projects.
We model and test two possible reasons for syndication: project selection, as an
additional venture capitalist provides an informative "second opinion"; or adding
value through complementary management skills of additional venture capitalists.
The central question is whether venture capitalists are primarily engaged in
selection or managerial value-added. These alternatives imply contrasting
predictions about comparative returns to syndicated and stand-alone investments.
Our empirical analysis, using Canadian data, finds that syndicated investments
have higher returns, favoring the value-added interpretation. We also discuss risk-
sharing and project scale as possible reasons for syndication.
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M. Da Rin and T. Hellmann, "Banks as a Catalyst for Industrialization", Journal of
Financial Intermediation, 11, 366-397, 2002. Winner of best paper of the year prize for
the Journal of Financial Intermediation
Abstract:
We provide a new theory of the role of banks as catalysts for
industrialization. In their influential analysis of continental European
industrialization, Gerschenkron and Schumpeter argued that banks promoted the
creation of new industries. We formalize this role of banks by introducing
financial intermediaries into a "big push" model. We show that banks may act as
catalysts for industrialization provided they are sufficiently large to mobilize a
critical mass of firms and that they possess sufficient market power to make
profits from coordination. The theory provides simple conditions that help explain
why banks seem to play a creative role in some but not in other emerging markets.
The model also shows that universal banking helps to reduce the cost of acting as
catalyst.
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T. Hellmann, "A Theory of Strategic Venture Investing", Journal of Financial
Economics, Vol. 64, 2, 285-314, 2002.
Abstract:
While start-ups are of strategic importance to them, established
corporations seem to play only a modest role in financing these start-ups. I
develop a theoretical model that examines the importance of a strategic
motivation for making venture capital investments. In a benchmark model with
perfect contracting, the entrepreneur always prefers a strategic corporate investor.
But if investors can take non-contractible actions the entrepreneur may prefer an
independent venture capitalist. Corporate investors may be unable to commit not
to shirk with support, not to exercise self-interested control, or not to invest in a
rival internal venture. Outcomes depend critically on the extent to which a start-
up complements or cannibalizes the profits of the established corporation.
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T. Hellmann and M. Puri, "Venture Capital and the Professionalization of Start-up Firms: Empirical
Evidence", The Journal of Finance, Vol. 57, No. 1, pp. 169-197, 2002.
Nominated for Brattle prize, ranked as a top 10 paper downloaded from SSRN
reviewed by Business Wire 01/29/01 and Reuters 01/30/01
Abstract:
This paper examines the impact venture capital can have on the
development of new firms. Using a hand-collected data set on Silicon Valley
start-ups, we find that venture capital is related to a variety of professionalization
measures, such as human resource policies, the adoption of stock option plans,
and the hiring of a marketing VP. Venture-capital-backed companies are also
more likely and faster to replace the founder with an outside CEO, both in
situations that appear adversarial and those mutually agreed to. The evidence
suggests that venture capitalists play roles over and beyond those of traditional
financial intermediaries.
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T. Hellmann and M. Puri, "On the Fundamental Role of Venture Capital",
"Economic Review", published by the Atlanta Federal Reserve Bank, 87, No. 4, 2002.
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