We thank for their research assistance Vanessa Broussard, Miriam Tawil, Daniel Goodman, Leif Holtzman, Alex Lee, and Chenling Zhang. Seminar participants at Columbia, Dartmouth, and Duke made helpful comments. Harvard Business School's Division of Research provided financial assistance. All errors and omissions are our own. The views expressed in this paper are the authors’ and should not be attributed to the Federal Reserve Bank of New York or the Federal Reserve System.
Specialization and Success: Evidence from Venture Capital
Article first published online: 23 JUL 2009
© 2009 Wiley Periodicals, Inc.
Journal of Economics & Management Strategy
Volume 18, Issue 3, pages 817–844, Fall 2009
How to Cite
Gompers, P., Kovner, A. and Lerner, J. (2009), Specialization and Success: Evidence from Venture Capital. Journal of Economics & Management Strategy, 18: 817–844. doi: 10.1111/j.1530-9134.2009.00230.x
- Issue published online: 23 JUL 2009
- Article first published online: 23 JUL 2009
This paper examines how organizational structure affects behavior and outcomes, studying the performance of different types of venture capital organizations. We find a strong positive relationship between the degree of specialization by individual venture capitalists at a firm and its success. When the individual investment professionals are highly specialized themselves, the marginal effect of increasing overall firm specialization is much weaker. The poorer performance by generalists appears to be due to both an inefficient allocation of funding across industries and poor selection of investments within industries. Venture capital organizations with more experience tend to outperform those with less experience.