Blurring Firm Boundaries: The Role of Venture Capital in Strategic Alliances



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    • Lindsey is at the W. P. Carey School of Business, Arizona State University. I am indebted to B. Douglas Bernheim, Thomas Hellmann, and Manju Puri for invaluable discussions and advice. I also wish to thank Katharine Carman, Stuart Gillan, Yael Hochberg, Jennifer Juergens, Spencer Martin, Amalia Miller, Antoinette Schoar, Morten Sørensen; seminar participants at Arizona State University, Stanford University, London Business School, University of Washington, University of Illinois at Urbana-Champaign, Cornell University, Harvard Business School, University of North Carolina at Chapel Hill; the Securities and Exchange Commission; and the SIFR Conference on Venture Capital for helpful comments and suggestions. Partial funding from the John M. Olin Program in Law and Economics at the Stanford Law School is gratefully acknowledged. A substantial portion of this work was completed as part of my dissertation at Stanford University. Any remaining errors are mine.


This study documents a new value-added role of venture capitalists and addresses important questions about how resources are combined to create firms. As part of the nexus of contracts surrounding a firm, strategic alliances can be viewed as relational contracts that blur firm boundaries. This paper provides evidence that alliances are more frequent among companies sharing a common venture capitalist. The effect is concentrated in alliances in which contracting problems are more pronounced, consistent with venture capitalists utilizing informational and other advantages in providing resources to firms. Further, these alliances improve the probability of exit for venture-backed firms.