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Does venture capitalist activism improve investment performance?

Publication ,  Journal Article
Jackson, WE; Bates, T; Bradford, WD
Published in: Journal of Business Venturing
May 1, 2012

We investigate whether venture capitalist (VC) activism is associated with higher investment returns. Advising portfolio firms is time consuming and creates tradeoffs between intensity of VC activism and portfolio size. As the number of assisted firms expands, advice can be stretched too thin, reducing portfolio company prospects. We test the hypothesis that increasing the number of investments while intensely assisting portfolio companies is negatively associated with investment returns (the profit destruction effect). We find that aggressive VC activism does predict higher investment returns, but the profit destruction effect operates as well. Portfolio size growth thus risks overextending scarce VC resources and lowering returns. © 2011 Elsevier Inc.

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Published In

Journal of Business Venturing

DOI

ISSN

0883-9026

Publication Date

May 1, 2012

Volume

27

Issue

3

Start / End Page

342 / 354

Related Subject Headings

  • Business & Management
  • 1505 Marketing
  • 1503 Business and Management
  • 1502 Banking, Finance and Investment
 

Citation

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Jackson, W. E., Bates, T., & Bradford, W. D. (2012). Does venture capitalist activism improve investment performance? Journal of Business Venturing, 27(3), 342–354. https://doi.org/10.1016/j.jbusvent.2011.02.003
Jackson, W. E., T. Bates, and W. D. Bradford. “Does venture capitalist activism improve investment performance?Journal of Business Venturing 27, no. 3 (May 1, 2012): 342–54. https://doi.org/10.1016/j.jbusvent.2011.02.003.
Jackson WE, Bates T, Bradford WD. Does venture capitalist activism improve investment performance? Journal of Business Venturing. 2012 May 1;27(3):342–54.
Jackson, W. E., et al. “Does venture capitalist activism improve investment performance?Journal of Business Venturing, vol. 27, no. 3, May 2012, pp. 342–54. Scopus, doi:10.1016/j.jbusvent.2011.02.003.
Jackson WE, Bates T, Bradford WD. Does venture capitalist activism improve investment performance? Journal of Business Venturing. 2012 May 1;27(3):342–354.
Journal cover image

Published In

Journal of Business Venturing

DOI

ISSN

0883-9026

Publication Date

May 1, 2012

Volume

27

Issue

3

Start / End Page

342 / 354

Related Subject Headings

  • Business & Management
  • 1505 Marketing
  • 1503 Business and Management
  • 1502 Banking, Finance and Investment