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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Jürges, Hendrik / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias


IMPACT FACTOR 2018: 0.520
5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

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ISSN
1935-1682
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Volume 10, Issue 1

Issues

Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Can Venture Capital Be a Curse?

George Kanatas / Christodoulos Stefanadis
Published Online: 2010-07-02 | DOI: https://doi.org/10.2202/1935-1682.2505

Abstract

We show that partnering with venture capitalists may be a curse to entrepreneurs in that it reduces their profits in the commercialization phase. Agents rationally infer that a likely reason an entrepreneur who has received managerial assistance (from a venture capitalist) refrains from a lucrative IPO and instead opts for an acquisition may be the low quality of his technology (which is unfixable), rather than of his management (which may be fixable). This leads to lower acquisition prices and greater IPO underpricing. From a social welfare standpoint, venture capital services are under-utilized and technologies are under-commercialized.

Keywords: management; technology; venture capital; IPO; acquisition

About the article

Published Online: 2010-07-02


Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 10, Issue 1, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.2505.

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