econstor

www.econstor.eu

Der Open-Access-Publikationsserver der ZBW – Leibniz-Informationszentrum Wirtschaft

The Open Access Publication Server of the ZBW – Leibniz Information Centre for Economics

Fritsch, Michael; Schilder, Dirk

Working Paper
Does venture capital investment really require spatial
proximity? An empirical investigation

Freiberg working papers, No. 2006,07

Provided in cooperation with:

Technische Universität Bergakademie Freiberg

Suggested citation: Fritsch, Michael; Schilder, Dirk (2006) : Does venture capital investment
really require spatial proximity? An empirical investigation, Freiberg working papers, No.
2006,07, http://hdl.handle.net/10419/27101

Nutzungsbedingungen: Terms of use:

Die ZBW räumt Ihnen als Nutzerin/Nutzer das unentgeltliche, The ZBW grants you, the user, the non-exclusive right to use
räumlich unbeschränkte und zeitlich auf die Dauer des Schutzrechts the selected work free of charge, territorially unrestricted and
beschränkte einfache Recht ein, das ausgewählte Werk im Rahmen within the time limit of the term of the property rights according
der unter to the terms specified at
→ http://www.econstor.eu/dspace/Nutzungsbedingungen → http://www.econstor.eu/dspace/Nutzungsbedingungen
nachzulesenden vollständigen Nutzungsbedingungen zu By the first use of the selected work the user agrees and
vervielfältigen, mit denen die Nutzerin/der Nutzer sich durch die declares to comply with these terms of use.
erste Nutzung einverstanden erklärt.

zbw
Leibniz-Informationszentrum Wirtschaft
Leibniz Information Centre for Economics
 TECHNICAL UNIVERSITY BERGAKADEMIE FREIBERG
TECHNISCHE UNIVERSITÄT BERGAKADEMIE FREIBERG

FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION

FAKULTÄT FÜR WIRTSCHAFTSWISSENSCHAFTEN

Michael Fritsch
Dirk Schilder

Does Venture Capital investment

really require spatial proximity?
An empirical investigation

FREIBERG WORKING PAPERS # 07

FREIBERGER ARBEITSPAPIERE 2006
The Faculty of Economics and Business Administration is an institution for teaching and re-
search at the Technische Universität Bergakademie Freiberg (Saxony). For more detailed in-
formation about research and educational activities see our homepage in the World Wide Web
(WWW): http://www.wiwi.tu-freiberg.de/index.html.

Addresses for correspondence:

Prof. Dr. Michael Fritsch†

Technical University of Freiberg
Faculty of Economics and Business Administration
Lessingstraße 45, D-09596 Freiberg (Germany)
Phone: ++49 / 3731 / 39 24 39
Fax: ++49 / 3731 / 39 36 90
E-mail: [email protected]

Dipl.-Volksw. Dirk Schilder

Technical University of Freiberg
Faculty of Economics and Business Administration
Lessingstraße 45, D-09596 Freiberg (Germany)
Phone: ++49 / 3731 / 39 36 78
Fax: ++49 / 3731 / 39 36 90
E-mail: [email protected]

† German Institute for Economic Research (DIW) Berlin, and Max-Planck Institute of Eco-
nomics, Jena, Germany.

We gratefully acknowledge the financial support by the German Research Foundation.

__________________________________________________________________________
ISSN 0949-9970

The Freiberg Working Paper is a copyrighted publication. No part of this publication may
be reproduced, stored in a retrieval system, or transmitted in any form or by any means, elec-
tronic, mechanical, photocopying, recording, translating, or otherwise without prior permission
of the publishers.

Coordinator: Prof. Dr. Michael Fritsch

All rights reserved.

__________________________________________________________________________
 I

Contents

Abstract / Zusammenfassung.................................................................................. II

1. Introduction.....................................................................................................1

2. Why should spatial proximity be important?..................................................2

3. The spatial distribution of VC supply and investments in Germany ..............5

4. Types of smart capital and investment behavior ..........................................11

4.1 The database .................................................................................................11

4.2 Number of investments and share of early stage financing ..........................13

4.3 Spatial proximity of investors and investments............................................15

5. Can spatial proximity be substituted?...........................................................17

6. Why is regional proximity so unimportant for VC investment? ..................24

7. Conclusions and implications .......................................................................25

References..............................................................................................................27
 II

Abstract

We examine the role of spatial proximity for Venture Capital (VC) investments in
Germany. The main database is a survey of 85 personal interviews with
representatives of different types of financial institutions. The analysis shows that
spatial proximity is far less important for VC investments than is often believed.
For example, the results indicate that syndication is partly used as an alternative to
spatial proximity. Telecommunication does not work as a substitute for face-to-
face contact. On the whole, regional proximity is not a dominant factor in VC
partnerships. Therefore, the absence of VC firms in a region does not appear to
cause a severe regional equity gap.

JEL-classification: G24, O16, D21, M13, R12

Keywords: Venture Capital, spatial proximity, start-up financing.

Zusammenfassung
“Ist für Venture Capital Investitionen tatsächlich räumliche Nähe
notwendig? Eine empirische Untersuchung“

Wir analysieren die Rolle räumlicher Nähe für Venture Capital (VC) Investitionen
in Deutschland. Die Datengrundlage bildet eine persönliche Befragung von 85
Investmentmanagern unterschiedlicher Typen von Finanziers. Die Analyse zeigt,
dass räumliche Nähe für VC Investitionen wesentlich weniger bedeutend ist, als
weithin angenommen. So finden sich beispielsweise Hinweise, dass die
Syndizierung von Investitionen zumindest teilweise als Alternative zu räumlicher
Nähe genutzt wird. Telekommunikation fungiert nicht als Substitut für
persönliche Kontakte. Insgesamt wird deutlich, dass regionale Nähe kein
bedeutender Faktor für VC Investitionen ist. Die Ergebnisse zeigen, dass das
Fehlen eines VC Investors in einer Region noch lange keine Grund für eine
regionale Unterversorgung an Risikokapital darstellt.

JEL-Klassifikation: G24, O16, D21, M13, R12

Schlagworte: Venture Capital, räumliche Nähe,
Existenzgründungsfinanzierung.
 1

1. Introduction

It is largely undisputed that spatial proximity of Venture Capital (VC) firms and
the location of their investments should be important. The assumption underlying
this conjecture is that spatial proximity may in many cases constitute a
precondition for the formation of a VC relationship and that it makes supervision
of investments easier. This hypothesis implies that innovative firms in regions
with no VC investment companies nearby may experience a serious disadvantage
due to an “equity gap”, i.e. poor availability of capital, and that this capital
shortage could severely hamper their emergence and development. But does this
supposition that spatial proximity plays such a decisive role really hold? Based on
an inquiry of VC suppliers in Germany, we cast serious doubt on the importance
of spatial proximity in VC partnerships, especially in comparison to other types of
financiers. We will show that geographic distance does matter, but its role is
largely overestimated in the literature. Furthermore, we find evidence that
regional proximity is less important for VC companies in comparison to other
types of suppliers of smart capital, such as banks or Business Angels.

Based on a short review of the literature about the importance of spatial

proximity for VC investment (section 2), we investigate the spatial distribution of
VC firms and their investments in Germany (section 3). Section 4 then provides
an overview on the characteristics of the different types of financial institutions
offering smart capital in our sample of interviewed firms and the spatial proximity
of their investments. We then analyze the role of the two means that may be used
for overcoming problems of spatial distance between VC suppliers and their
investment, telecommunication, and syndication (section 5). Finally, we discuss
reasons for the relatively low importance of regional proximity for VC
investments in Germany (section 6) and draw conclusions for a policy as well as
for further research (section 7).
 2

2. Why should spatial proximity be important?

The dominant goal of VC investments is to add value to the financed company

and to sell the investment share with considerable profit. The VC companies’
main tasks are the identification of promising investment opportunities and a
strong post-investment involvement; i.e., monitoring and supervising the
companies in their portfolio. Several studies suggest that identification of
promising investment opportunities and involvement in business affairs of the
portfolio firms may require intensive communication combined with frequent
face-to-face contact and that such a close relationship cannot be maintained over
larger distances.1

There are a number of arguments for the importance of spatial proximity in

VC investments. First, regional proximity may be necessary in order to gain
knowledge about companies that could be a promising investment (Green, 1991,
23; Doran and Bannock, 2000). Since such knowledge may be tacit and mainly be
communicated by personal contact, it can be largely limited to the local business
community (Florida and Kenney, 1988; Powell et al., 2002; Thompson, 1989).
Spatial proximity may also be conducive for making a final investment decision
which will in most cases require close face-to-face and on-site inspection of the
project (Sorensen and Stuart, 2001). Second, proximity may be needed for an
appropriate exchange of knowledge with the portfolio company and a high level
of monitoring by the VC firm (Gompers, 1995; Lerner, 1995). A regular exchange
of information may be an important factor for the success of the portfolio
company and, therefore, of the investment (Sorensen and Stuart, 2001; De Clercq
and Sapienza, 2006). Empirical research has shown that this information flow is in
both directions, i.e., from the firm to the VC company as well as from the investor
to the portfolio firm (Schäfer and Schilder, 2006; Sapienza and Gupta, 1994;
Sapienza et al., 1996). It is commonly assumed that the costs of monitoring and
supervision will sharply increase as the distance between the partners increases

1
Fried and Hisrich (1995), Gompers (1995), Hellmann and Puri (2002), Kaplan and Strömberg
(2004), Lerner (1995), Macmillan et al. (1988), Sahlman (1990), Sapienza (1992), Sapienza et al.
(1996), Sorenson and Stuart (2001)
 3

(Mason and Harrison, 2002a; Sorensen and Stuart, 2001). If a portfolio firm is not
located within the distance of a day trip, personal contacts will probably require
much higher transaction costs and, therefore, be less frequent than if the
investment would be close to the site of the investor. As contacts via
telecommunication can be regarded as a partial substitute for face-to-face
contacts, one may expect a negative relationship between regional proximity and
the frequency of telecommunication. Accordingly, the number of personal face-
to-face contacts should be higher if investments are located nearby (Petersen and
Rajan, 2002).

There are good reasons to assume that the need for monitoring and
consulting and, therefore, the importance of spatial proximity depends to a
considerable degree on the development stage of the financed firm. A young
company in the early phase of its technical and organizational development,
which still does not generate considerable turnaround or profit, is likely to require
more involvement by the VC firm than a company at a later stage (Gupta and
Sapienza, 1992). This may particularly hold for innovative businesses which are
still in the phase of developing their product. Possible reasons are a lack of
business and management skills in young innovative companies which are in most
cases run by engineers or natural scientists (Gupta and Sapienza, 1992) as well as
a high uncertainty of the technical and economic success of the project (Sapienza
et al., 1996). Therefore, monitoring and supervision of investments in earlier
stages may be more time-consuming and cause higher transaction costs than in the
case of an investment in a later stage. Hence, spatial proximity can be expected to
be more important for early stage investments (Sorensen and Stuart, 2001).
Accordingly, a VC supplier with a high share of early stage investments in its
portfolio should have pronounced preferences for investments being located
nearby (Elango et al., 1995).

A further factor that is said to influence the distance between the VC

supplier and the portfolio firm is the size of the VC company. The larger the VC
firm in terms of the number of investments or the number of managers, the more
likely it is that investments are made in more distant locations (Gupta and
Sapienza, 1992; Powell et al., 2002). One reason for this is that a large venture
 4

capitalist with voluminous available funds is perhaps faced with only rather
limited investment opportunities in his region and, therefore, has to explore
investment opportunities in more distant locations in order to utilize the available
resources. Another reason why VC suppliers with larger funds may have more
investments at distant locations is that they have greater and, perhaps, also better
resources for monitoring and consulting. Presence of large amounts of resources
also raise the probability for having a closely tied communication network
available which facilitates access to a greater number of investment opportunities
and to more syndication partners (Fried and Hisrich, 1995). Syndication here
means that the investment involves several investors which allows for sharing the
volume of investment as well as the risk and the work involved (Lerner, 1994;
Brander et al., 2002; Lockett and Wright, 2001; Gompers and Lerner, 2001;
Doran and Bannock, 2000). It can constitute an important strategy of VC suppliers
to reduce the disadvantages of spatial distance to a portfolio company (Florida and
Kenney, 1988; Sorensen and Stuart, 2001). In the case of a syndicated investment,
the so-called lead-investor undertakes the main task of monitoring and consulting
whereas the co-investors are involved with the business of the financed firm to a
considerably lesser degree (Gupta and Sapienza, 1992). For these co-investors,
regional proximity is not as important as for the lead-investor because of the
lower need of direct face-to-face contact with the portfolio company (Wright and
Lockett, 2003). Therefore, joining a syndicate as a co-investor may be a measure
of overcoming possible problems attached to spatial distance to the portfolio firm.

If VC firms are publicly funded or in public ownership they may face

governmental restrictions with regard to the location of their investments (Doram
and Bannock, 2000; Gupta and Sapienza, 1992). Quite frequently, publicly owned
VC suppliers are destined for providing capital in a specific region and are,
therefore, not allowed to make investments outside this region or abroad (Doran
and Bannock, 2000). Furthermore, the scope of investments of VC companies in
public ownership may be concentrated on projects in later development stages.
They may also have relatively few equity investments and more mezzanine
 5

products2 or silent partnerships (Schilder, 2006). The two latter forms of financing
instruments are located between the two poles of equity and debt in balance-sheet
terms. They usually do not include voting rights and do, in most cases, involve
less risk than equity financing. A focus of public VC companies on these products
may be grounded in a higher degree of risk aversion. Moreover, it may not be the
primary goal of a public VC company to sell its shares on the market but to
transfer them back to the company. This is easier for mezzanine products as they
mostly have fixed maturity (Tykvova, 2004; Bascha and Walz, 2002). The fewer
early stage investments can be explained by their common governmental mission
of promoting all kinds of companies and not only start-ups. On the one hand, a
relatively low share of early stage investments in the portfolios of public VC
firms, fewer direct equity investments and, therefore, less involvement in the
management of the portfolio companies may lead to only low importance of
regional proximity for their investments. On the other hand, publicly owned VC
companies can be expected to localize their investments due to governmental
restrictions. Consequently, the public ownership of VC companies will probably
shape the regional focus of their investments and, hence, the importance of spatial
distance to portfolio companies.

3. The spatial distribution of VC supply and investments in Germany

The spatial distribution of VC suppliers and investments on VC markets can

provide the first indications of the role of spatial proximity for investments. For
the VC market in the USA several studies found a high degree of spatial
clustering of suppliers and investments on the east and west coasts of the country
(Sorensen and Stuart, 2001; Powell et al., 2002; Florida et al., 1991; Leinbach and
Amrhein, 1987). The UK VC market is also highly clustered around London and
the southeast part of the country, thus, playing a dominant role (Mason and
Harrison, 1999, 2002a; Martin, 1989; Martin et al., 2005). For the ‘emerging’ VC

2
Mezzanine products refer to unsecured, high-yield, subordinated debt, or preferred stock that
represents a claim on a company's assets that is only senior to that of a company's shareholders.
 6

markets in continental Europe, such as France and Germany, Martin et al. (2002)
also found a considerable degree of spatial concentration but this concentration
was not as pronounced as in the case of the USA or the UK.

The data from the German Private Equity and Venture Capital Association
(Bundesverband Deutscher Kapitalbeteiligungsgesellschaften; BVK) confirm this
result of a relatively low degree of spatial concentration of the German VC
market. The suppliers of this market are clustered in five regions with Munich as
the leader having around 30 of the more than 170 regular members of the BVK in
January 2006 and Frankfurt a. M. is in second place with 27 VC suppliers (figure
1). However, Berlin, Hamburg, and the Rhine-Ruhr area (Duesseldorf, Cologne,
Bonn) have around 20 VC suppliers each and several of the VC firms can also be
found in smaller places. The black color in figure 1 indicates VC companies
which could be clearly identified as having an underlying predominantly public
influence, either through direct public ownership or a majority of public funding.
Such public VC companies obviously play a considerable role in the German
market (Sunley et al., 2005). The more obvious dispersion in space of the
predominantly public VC suppliers is probably a result of the influence of public
bodies on their choice of location. The spatial distribution of the German Business
Angels Networks3, which are indicated by flags in figure 1, is quite similar to the
distribution of the formal private VC firms. Although, these networks only
represent a small fraction of the informal VC investors, they give indication for
their regional distribution.

The spatial distribution of the total VC investments made by the members of

the German Private Equity and Venture Capital Association (figure 2) also shows
a considerable degree of regional concentration. About 60 percent of the overall
2.5 billion € of the public and private VC investment in the years 2003, 2004 and
2005 was made in three out of the fifteen federal states – Bavaria, Baden-
Wurttemberg, and North Rhine-Westphalia. However, only slightly more than 40
percent of the German start-ups can be found in these states.

3
Members of the German Business Angels Network association (Business Angels Netzwerk
Deutschland e.V.).
 7

Hamburg
Bremen

Berlin
Hanover

Duesseldorf Dresden
Erfurt
Jena
Bonn

Frankfurt/Main

Saarbruecken Nuremberg

Regensburg
Stutgart

Munich

z 10-31 z 4-9 z 2-3

public VC companies
z 1 (Number of VC companies)

private VC companies

One Business Angels network Two Business Angels networks

Figure 1: The spatial distribution of VC firms in Germany (symbol size shows

total figures)4

4
Regular members of the German Private Equity Venture Capital Association and members of the
German Business Angels Network Association in January 2006.
 8

14,4 12,7 23,1 Schleswig-

Holstein
27,5
45,3 7,4 8,2
11,0 14,8
Mecklenburg-
Western Pomerania
25,1 Hamburg
0,9 1,5
Bremen 92,7
71,8
49,4 52,2 43,3
31,5

Lower Saxony Berlin

179,2 30,5 28,1 27,5 7,8 3,8 4,9
159,9
North Rhine-
Westphalia Brandenburg
Saxony Anhalt
67,6
Saxony
86,0 30,5 28,0
17,1
100,5
23,4 Thuringia
12,0
38,6 26,1

32,3 Hesse
10,1 16,2
Rhineland-
17,3 Palatinate
5,8 1,7 221,5 213,9
Bavaria
Saarland 178,6 180,9
139,9

105,5

Baden-
Wuerttemberg

2003 in mio. € 2004 in mio. € 2005 in mio. €

Figure 2: The geographical distribution of VC investments in Germany5

5
Source: German Private Equity and Venture Capital Association: VC Investments in the years
2003, 2004 and 2005 in million €.
 9

Table 1: Comparing inequality of the regional distribution in the VC industry

Donaldson-Weymark
relative S-Gini
inequality measures
Number of private VC companies 0.97

Number of public VC companies 0.96

Number of banks (all types) 0.45

Number of savings banks with specialist for start-up
0.39
financing
Number of R&D intensive start-ups (mean over the
0.45
years 1990-2003)
Number of technology intensive start-ups (mean over
0.52
the years 1990-2003)
Number of technology intensive start-ups (mean over
0.60
the years 1990-2003)
Number of patents (mean over the years 1995-2000) 0.42

In order to assess the spatial concentration of the German VC industry, we

calculated Gini coefficients for the regional distribution of the VC companies and
other types of financial institutions as well as for some measures of innovative
activity6 (table 1). These measures of innovative activity such as the number of
innovative start-ups or the number of patents point to locations of VC investment
opportunities.7 The Gini coefficients clearly show a much stronger spatial
concentration of public and private VC companies compared to the distribution of
banks8. The difference is even more pronounced when comparing the value of the
Gini coefficients for the VC companies with the value for the public savings
banks which have at least one employee who is specialized in the financing and
consulting of start-ups. The indicators for innovative activity also show a much
lower degree of spatial concentration compared to the VC companies. These
results indicate that the spatial clustering of VC firms in Germany is much more
pronounced than the geographic concentration of the overall finance industry and

6
See e.g., Fritsch and Slavtchev (2005, 2006) for a more detailed analysis.
7
Unfortunately, we cannot use the regional distribution of VC investments for this comparison
because these data are only available on the state level and not on the level of districts.
8
These banks are accredited by the German Federal Financial Supervisory Authority.
 10

innovative activity. If spatial proximity should be important for the emergence

and the maintenance of a VC partnership this higher concentration of VC firms
could seen as an indication that there may exist an equity gap in some regions.

Table 2: Rank correlation coefficients for the relationship between the location of
VC companies, banks, and potential investment targets

Variable: 1 2 3 4 5 6
Number of start-ups (mean
1 1.00
over the years 1990-2003)
Number of R&D intensive
2 start-ups (mean over the 0.89** 1.00
years 1990-2003)
Number of technology
3 intensive start-ups (mean 0.91** 0.87** 1.00
over the years 1990-2003)
Number of knowledge
4 intensive start-ups (mean 0.89** 0.82** 0.94** 1.00
over the years 1990-2003)
Number of banks
5 0.40** 0.50** 0.51** 0.49** 1.00
(all types)
Number of public VC
6 0.27** 0.25** 0.28** 0.29** 0.19** 1.00
companies
Number of private VC
7 0.35** 0.32** 0.39** 0.39** 0.26** 0.32**
companies
Spearman and Kendall’s rank correlation coefficients. ** Statistically significant at the 1%-level.

The regional distribution of VC suppliers may be shaped by two factors

(Mason and Harrison, 1999, 173-176). First, if VC companies want to be close to
their portfolio companies their locational choice may be strongly shaped by the
distribution of potential investments. Second, VC companies may prefer locations
close to other financial institutions in order to benefit from all kinds of
agglomeration advantages such as close contact to co-investors (Martin et al.,
2005). The Gini coefficients (table 1) indicate clear differences in the spatial
concentration between VC companies, potential investment targets, and the
overall banking sector. Rank-correlation coefficients have been calculated (table
2) in order to assess in how far the spatial distribution of the VC companies
corresponds to the location of their potential investment targets or of other
 11

financial institutions. The results show that the regional distribution of public and
private VC companies is linked to both the distribution of investment targets and
financial institutions. Though, the distribution of the public VC firms is less
dependent on the two factors. According to these coefficients, the correspondence
of the location of VC companies and the location of banks is somewhat less
pronounced than the relationship between the location of VC companies and
innovative start-ups. However, the values of these coefficients, although all
statistically significant at the one percent level, do not point to a dominant
influence. Therefore, we still cannot say if necessity of spatial proximity to
portfolio investments is the main reason for the location of VC companies.

Unfortunately, the data which was used from the German Private Equity and
Venture Capital Association do not allow one to identify the location of
investments made by a specific VC company. For a further analysis of the role of
spatial proximity between VC firms and their portfolio companies we, therefore,
use another database that entails a sample of this industry. This database is
introduced in the next section.

4. Types of smart capital and investment behavior

4.1 The database

The empirical in depth-analysis of the role of spatial proximity for VC in

Germany is based on an interview survey that was carried out between September
2004 and September 2005. The survey consists of 85 personal interviews with
managers that were actively involved in corporate financing and were specialized
in start-up financing. All interviews were based on a largely standardized
questionnaire. Questions pertained mainly to investment behavior, to selection of
investments as well as to monitoring and supervision of portfolio companies. A
special focus was on the role of spatial proximity for the selection and
management of an investment. We interviewed one manager per firm. The firms
from the sample were located in diverse areas of Germany. For the purpose of this
paper, we will not use the ten financiers which did not offer start-up financing.
 12

Therefore, only 75 usable questionnaires remain for the analysis. The sample
covers different types of financiers which offer money for innovative young
companies. It contains 22 independent and corporate VC companies, eleven
Business Angels, nineteen banks, fourteen VC subsidiaries of banks, and nine
public providers of equity. The firms from the sample can be regarded as a
representative for the respective type of financial institutions; we are, at least, not
aware of any bias in the sample.

In contrast to the data used in section 3, the structure of the sample has two
main advantages. Firstly, it provides a detailed insight into the investment
behavior of the German VC suppliers. Secondly, since the survey is not solely
limited to financial institutions which are completely specialized in VC, it allows
us to analyze the heterogeneity of the market for smart capital and to compare
different types of financiers. By smart capital we mean a financial relationship
between a provider of finance and new innovative businesses that is connected
with pronounced reciprocal information flows between the financier and the
financed company (Schäfer and Schilder, 2006). In addition to equity investments
with hands-on support, the typical element of VC, smart capital also comprehends
of credit financing offered by banks and informal VC investments by Business
Angels.

While there is pronounced heterogeneity between the financiers in the

sample with regard to a number of characteristics, they all focus on nearly the
same financial products. This is very important issue because different financial
products may require different degrees of spatial proximity. Silent partnerships,
mezzanine products, and credits, for example, may require considerably less
monitoring, consulting, and regional proximity than direct equity investments due
to lower participation in the portfolio company’s return and fewer rights of
involvement (Bascha and Walz, 2002).

Apart from banks, which almost exclusively use credit financing, all other
intermediaries in our survey offer equity capital or at least products that are equity
linked. Table 3 shows the average importance of the financial products offered
from a range from one, i.e., the investor does not supply this product at all, to
four, which means that this is the most frequently used product. In line one, for
 13

example, we can see that the banks focus on credit, whereas the other types of
financiers in our sample hardly use this type of financing. Silent equity
investments and mezzanine financing occur more frequently with the bank’s VC
subsidiaries and public VC suppliers. Direct investments in the form of minority
holdings are particularly preferred by VC companies and Business Angels.

Table 3: Importance of financial products (mean values)

Business
VCs Banks Bank-VCs public VCs
Angels
Credits 1.05 1.27 3.95 1.00 1.00

Silent partnerships 1.04 1.00 1.31 2.43 3.33

Mezzanine
1.00 1.00 1.37 1.19 1.33
products
Direct investments
3.00 2.28 1.00 2.29 1.67
up to 25%
Direct investments
3.14 3.64 1.00 3.57 2.67
25-50%
1 = not used; 2 = seldom used; 3 = often used; 4 = very frequently used

4.2 Number of investments and share of early stage financing

In addition to the relatively small differences of the financial products used, there
is an enormous degree of heterogeneity of VC suppliers and other types of
financiers offering smart capital with regard to the structure of the companies and
their portfolios. The average number of professional investment managers in a
firm ranges from one for the Business Angels to 10.5 within the public VC firms.
The average number of portfolio companies is between 3.6 investments for
Business Angels and 417 VC investments in the average portfolio of a bank.9
This difference becomes even more pronounced with regard to the average
number of firms that one employee has to monitor and advise (figure 3).

9
All figures pertain to the department in which the interviewee worked. Since this mainly affects
banks, their total size might be underestimated by these figures.
 14

120.00

100.00

80.00

60.00

40.00

20.00

0.00
VCs Business Angels Banks Bank-VCs public VCs

Figure 3: Average number of portfolio companies per investment manager

The ratio of portfolio companies per investment manager is important

because the more companies a manager has to maintain, the less time he can
spend on each of these companies; thus, the importance of spatial proximity may
be relatively high. For the VC companies, the bank-dependent VC firms, and the
Business Angels, the average number of companies per manager is about four.
The number of companies per manager is considerably higher for the public VC
companies (more than fifteen investments per manager). The largest number of
portfolio companies per manager, on average 100 investments, is found for the
banks which are credit financiers. The fewer management resources per portfolio
firm among the banks may lead to higher importance of regional proximity to the
location of the investment.
 15

100.00

90.00

80.00

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00
VCs Business Angels Banks Bank-VCs public VCs

Figure 4: Average share of early stage investments within a portfolio (in

percentage)

There are considerable differences between the types of financiers with

regard to the share of early stage investments in their portfolio (figure 4).
Investments in companies which are in the early stages of their technological and
organizational development may require relatively intensive consulting and,
therefore, spatial proximity. While this share of early stage investment amounts to
more than 90 percent for the Business Angels in our sample and about 70 percent
for the VC companies, it is much lower for banks10 and for bank-dependent VCs
(about 50 percent). The lowest share of start-up investment, less than 30 percent,
is found for VC providers in public ownership. These figures suggest that regional
proximity may be of less importance for the latter group.

4.3 Spatial proximity of investors and investments

In the interviews we asked for the average share of investments in four spatial
categories: at the same site, not at the same site but within a distance of 100 km,
more than 100 km away but within Germany, and investments abroad. The results

10
As this figure pertains only to the department in which the interviewee is working, the average
share of start-ups within the whole banks portfolio is even smaller.
 16

reveal great differences between the types of providers of smart capital in our
sample (figure 5).
80.00

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00
VCs Business Angels Banks Bank-VCs public VCs
Investment at the same site Not at the same site but within 100 km distance
Within Germany in more than 100 km distance Abroad

Figure 5: Average share of investments within a certain distance (in percentage)

Banks, bank-dependent VC firms, public VC companies, and Business

Angels all have more than 75 percent of their investment within a distance of 100
km; thus, these portfolio firms can be easily reached. In contrast, the independent
VC investors in our sample have less than 30 percent located within such a short
distance but have spread their investments all over Germany and abroad. The high
concentration of banks having investments in close proximity is, at least at first
sight, rather astonishing because Schäfer and Schilder (2006) show that banks
offer a lower amount of consulting than VC companies; hence, spatial proximity
should be of relatively low importance. The high share of investments nearby can
be explained by their tight net of regional branches which makes investments in
distant locations unnecessary. While the high share of investment within the
region, which we find for Business Angels, may be caused by the limited amount
of resources they have available, the public venture capital companies are often
limited in their regional focus by administrative or legal constraints.
 17

5. Can spatial proximity be substituted?

Suppliers of VC may adopt two strategies for overcoming the problems of

distance related with investments that are not located nearby. These approaches
might be particularly important for independent VC companies because their
investments are more often located farther away (see chapter 4). The first strategy
for substituting spatial proximity is an intensive use of modern measures of
telecommunication that may make many of the personal contacts obsolete. The
second strategy is the syndication of investments.

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00
VCs Business Angels Banks Bank-VCs public VCs

Personal contacts Contacts via telecommunication

Figure 6: Average number of personal contacts and contacts via

telecommunication per month

Figure 6 shows the average frequency of contacts, personal and via

telecommunication, between the investor and their portfolio companies per
month. On average, the financiers meet their portfolio companies once a month.
The highest number of meetings (1.64 personal contacts per month) is found for
the Business Angels and the lowest number (0.43 meetings) for banks. The
average number of contacts via telecommunication differs much more between
the types of financiers. While the VC firms contact their portfolio companies via
 18

phone or internet eight times a month, the banks have an average of about 1.5
contacts. The number of telecommunications of the other types of financiers is
between 2.3 and 4.2 contacts per month.

The results indicate that those types of financiers which have a relatively
large share of investments located further away, particularly the independent VC
firms, have more contacts via telecommunication than investors with a
pronounced regional focus. If telecommunication works as a substitute for
personal contacts then the number of personal contacts should be relatively low
for those companies which have frequent contact with their companies by means
of telecommunication. We find, however, a rather similar pattern for the number
of personal contacts and the number of telecommunications (figure 6). This result
suggests that both ways of communication are complementary and do not
constitute substitutes.

Table 4: Rank correlation coefficients for the average distance to investments and
the number of contacts per month

Variable: 1 2 3 4 5 6
Share of investments at
1 1.00
the same site
Share of investments not
2 at the same site but -0.40** 1.00
within 100 km distance
Share of investments
3 within Germany in more -0.62** -0.04 1.00
than 100 km distance
Share of investments
4 -0.46** -0.17 0.22 1.00
abroad
Number of personal
5 -0.18 -0.04 0.07 0.14 1.00
contacts per month
Number of contacts via
6 telecommunication per -0.34** -0.06 0.26* 0.25* 0.72** 1.00
month
Spearman and Kendall’s rank correlation coefficients. ** Statistically significant at the 1%-level;
* Statistically significant at the 5%-level. Number of cases: 75.
 19

The complementary relationship between personal contacts and

telecommunication is confirmed by rank correlations on the micro-level of
financiers reported in table 4. Although, the number of monthly contacts is higher
if a large share of portfolio firms is not located on-site; the rank correlation
coefficient of 0.72 for the relationship between the number of personal contacts
and the number of telecommunications indicate a strong complementary
relationship of the two modes of communication.11 We can, therefore, conclude
that telecommunication is not a substitute for face-to-face contacts and is not used
as a means to overcome disadvantages of spatial distance.

The second possibility to substitute regional proximity is the syndication of

investments (Florida and Kenney, 1988; Sorensen and Stuart, 2001). In a
syndicated investment, the lead investor conducts most of the monitoring and
consulting. For him or her, regional proximity may be more important than for the
co-investors who can behave more or less passively. Therefore, if an investment is
located in a great spatial distance, syndication with a partner located close to this
investment could help to overcome the problems of distance, at least for the co-
investor. Therefore, we expect that financiers with a high share of investments in
spatial distance will engage more in syndication with other firms than VC
providers which have most of their investment located on-site.

The different types of financiers in our sample show distinct syndication

behavior. On average, the VC companies and the Business Angels syndicate 77
percent and 70 percent of their investments, respectively. The public VC firms
and the banks’ subsidiaries syndicate less than two thirds of their projects. The
lowest rate of syndication is found for the banks which have one or more co-
investors for about one third of their investments. The average total number of
syndication partners over the whole portfolio varies even more. The VC
companies cooperate on average with 14.5 syndication partners whereas the
Business Angels and the banks on average only syndicate with around five

11
A nearly similar pattern of correlation coefficients can be found if they are calculated for each
group of VC providers separately.
 20

financiers.12 The banks’ VC subsidiaries and the public VC companies lie in

between these values with a mean of about ten syndication partners over the
whole portfolio.

To find out whether the spatial focus of VC investments corresponds to the

syndication strategy, we asked the interviewees for the location of their
syndication partners. The possible categories were the same as for the location of
investments (on-site, not on-site but within 100 km distance, within Germany but
in more than 100 km distance, abroad). If syndication of investments works as a
strategy to overcome disadvantages of spatial distance, we expect that the
syndication partners are located close to the investment, particularly close to those
investments that are located far away. Therefore, the share of syndication partners
located far away should be the higher the larger the share of investments in distant
portfolio firms.

We find, indeed, that the regional distribution of syndication partners for the
different types of VC providers (figure 7) is quite similar to the regional
distribution of their investments as given in figure 5. The independent VC
companies have on average more investment and more syndication partners in
distant locations than the banks, the bank VC subsidiaries, the Business Angels,
and the public equity suppliers, which on average have a higher share of
investments and syndication partners nearby.

12
The number of syndication partners within a single investment varies between one and around
ten.
 21

70.00

60.00

50.00

40.00

30.00

20.00

10.00

0.00
VCs Business Angels Banks Bank-VCs public VCs
Syndication partner at the same site Not at the same site but within 100 km distance
Within Germany in more than 100 km distance Abroad

Figure 7: Average share of syndication partner within a certain distance (in

percentage)

The correspondence between the share of distant investments and of

syndication partners is confirmed by rank correlations on the micro-level of the
financiers (table 5). The rank correlation coefficients for the relation between the
share of investments and of syndication partners in the same spatial category are
between 0.41 and 0.7, all statistically significant at the 1-% level.13 This clearly
shows that investments in distant locations make cooperation with syndication
partners located far away more likely. This suggests that the syndication of VC
investments is used to overcome problems of distant location of investments.
However, our data does not show on detail whether the syndication partner are
located close to the investments.

13
The results are quite similar if the correlation coefficients are calculated for the different types
of VC providers separately.
 22

Table 5: Rank correlation coefficients for the relation between the share of
investments and of syndication partners in certain spatial categories

Variable: 1 2 3 4 5 6 7
Share of
investment

1 • at the same site 1.00

2 • not at the same

site but within -0.41** 1.00
100 km distance
3 • within Germany
in more than -0.63** -0.06 1.00
100 km distance

4 • abroad -0.44** -0.17 0.25* 1.00

Share of
syndication
partners

5 • at the same site 0.41** -0.05 -0.34** -0.36** 1.00

6 • not at the same

site but within 0.01 0.46** -0.18 -0.17 -0.23 1.00
100 km distance

7 • within Germany
in more than 100 -0.28* 0.00 0.61** 0.04 -0.53** -0.16 1.00
km distance

8 • abroad -0.30* -0.14 0.20 0.70** -0.49** -0.14 0.11

Spearman and Kendall’s rank correlation coefficients. ** Statistically significant at the 1%-
level; * statistically significant at the 5%-level. Number of observations: 75

The results do not clearly show whether VC providers really mainly have
regional proximity to an investment in mind when looking for a syndication
partner. Therefore, we have asked the financiers to attach weights between one
(meaning unimportant) and five (meaning dominant) to their reasons for the
syndication of an investment and for the choice of a certain syndication partner.
The answers to this question clearly show that the syndication partner’s spatial
proximity to the investment is the least important of the determinants (figure 8).
According to these figures the most important reasons for syndication are a large
financial volume of investment, risk sharing, the expertise of the syndication
 23

partner, and the access to the syndication partner’s network. This holds for all
types of financial institutions offering smart capital. We can, therefore, conclude
that spatial proximity to the location of investment plays a role for syndication
behavior, but that it is by far not the dominating motive.

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00
VCs Business Angels Banks Bank-VCs public VCs
Specialization of syndication partner Risk-sharing
Large financial volume of investment Syndicaiton partner's spatial proximity to
Syndication partner's network investment

Figure 8: What do the financiers look at when choosing a syndication partner

In summarizing the evidence, we can say VC suppliers, especially privately

held independent VC firms, do not entirely focus on investments nearby but have
also firms in distant locations in their portfolio. This is particularly true in
comparison to other providers of smart capital. Modern measures of
telecommunication do not seem to work as a substitute for regional proximity.
Syndication of investments may be such a substitute. However, we find that
spatial proximity of the syndication partner to the investment is the least important
motive for a joint investment. We, therefore, have to ask why regional proximity
plays such a minor role.
 24

6. Why is regional proximity so unimportant for VC investment?

Although we found an obvious clustering of VC companies and investments in

Germany (section 3), our survey indicates that regional proximity between the VC
firm and the portfolio company does in no way play a dominant role. All of our
interview partners agreed that regional proximity is definitely an advantage for
VC investments, mainly due to lower costs and fewer problems of monitoring and
advising. Although, none of the interview partners neglected the importance of
monitoring and supervision on-site of the portfolio companies; most of them
stated that spatial proximity is not a dominant factor in this respect. With the
exception of public VC companies, which are mostly restricted to their region,
none of the interviewed VC managers would reject a promising investment
opportunity that is not located at the same site, at least as a member of a syndicate.
The reasons for this are diverse.

First, the spatial structure of Germany is rather balanced and accessibility of

any location within Germany is relatively easy – at least if compared to countries
such as the UK or the US. Spatial distances are much smaller than in the US and a
dense infrastructure for traveling exists almost everywhere. Nearly all locations in
Germany can be reached within a day and in most cases there are convenient
possibilities to return home on the same day. As in the study of the informal VC
market in the UK by Mason and Harrison (2002b) many investment managers
interviewed in our survey stated that they do not want to travel longer than two
hours to visit a company and that many locations in Europe can be reached by a
two hour plane trip. Furthermore, for the monitoring and consulting of companies
that are located far away, some managers prefer staying several days on-site,
which causes the travel times to be less important.

Second, the majority of the interview partners stated that a limited pool of
promising investment opportunities was a main reason for searching outside the
region. They would invest in new companies located nearby if there were some.
Therefore, if the mountain won't come to Mohammed, then Mohammed has to go
to the mountain. Obviously, the main restriction for the German VC companies is
the availability of promising investment targets, not time and effort of monitoring
 25

and consulting. One of the VC managers that we interviewed wrote this on his
questionnaire: “It is not time to pick and chose in the regional sense as long as you
want to earn money.”14 This indicates that the main bottleneck for occurrence of a
VC investment in Germany is not the absence of VC suppliers but the limited
number of promising projects.15 As a consequence of the lack of investment
opportunities of a sufficient quality, only about 20 billion € out of the 45 billion €
under management by the members of the German Private Equity and Venture
Capital Association have been invested in companies as of May 2005.16

7. Conclusions and implications

In this paper we have examined the role of regional proximity for VC

investments. The main part of the empirical analysis was based on a survey of 85
face-to-face interviews made with different types of financiers in Germany. This
database not only enabled us to gain insight into the investment behavior of VC
companies and their attitude towards the importance of spatial proximity to
portfolio companies, but also we could also compare the results of the importance
of regional proximity for different types of financiers offering smart capital.

The analyses clearly showed that the importance of regional proximity

between the VC firm and its portfolio companies is widely overestimated in the
literature. The VC companies in Germany, especially the private and independent
VC firms, do not focus mainly on investments located nearby. Although
telecommunication and syndication of investments may be employed to overcome
disadvantages of distance, none of these measures seemed to play a dominant role.
The reasons that we found for the striking unimportance of geographical distance
for German VC providers were the balanced spatial structure that leads to good
accessibility of most locations in the country as well as a lack of promising
investment opportunities on-site.

14
Translation from German questionnaire.
15
Harding (2000) draws similar conclusions for the UK.
16
German Private Equity and Venture Capital Association (2005).
 26

One main conclusion of our analysis is that the absence of VC firms in a

region is not likely to be a bottleneck for innovative entrepreneurs in Germany.
We cannot confirm that there are equity gaps in certain regions that represent a
severe problem for innovative start-ups. At least from the perspective of the VC
managers, the main bottleneck is the presence of promising investment
opportunities. We can, however, not completely preclude the existence of
informational bottlenecks that prevent entrepreneurs and VC suppliers to match.

Our results lead to some important questions for further research. First, the
role of syndication as a possible substitute for regional proximity in the VC
industry should be more illuminated. Second, it would be rather interesting to
compare the performance of investments on-site with investments in considerable
spatial distance to find out if proximity really does not play an important role.
And third, additional research is desirable to find out if a regional equity gap or an
information problem exists especially from the viewpoint of entrepreneurs that
search for VC.
 27

References

Bascha, Andreas and Uwe Walz (2002): Financing Practices in the German
Venture Capital Industry: An Empirical Assessment, CFS Working Paper,
2002/08.
Brander, James A, Raphael Amit, Werner Antweiler (2002): Venture-Capital
Syndication: Improved Venture Selection vs. the Value-Added Hypothesis,
Journal of Economics & Management Strategy, 11, 423-452.
De Clercq, Dirk and Harry J. Sapienza (2006): Effects of Relational Capital and
Commitment on Venture Capitalists’ Perception of Portfolio Company
Performance, Journal of Business Venturing, forthcoming.
Doran, Alan and Graham Bannock (2000): Publicly Sponsored Regional Venture
Capital: What can the UK learn from the US Experience?, Venture Capital,
2, 255-185.
Elango B., Vance H. Fried, Robert D. Hisrich and Amy Polonchek (1995): How
do Venture Capitalist Firms Differ, Journal of Business Venturing, 10, 159-
179.
Florida, Richard L. and Donald F. Smith (1988): Venture Capital, High
Technology and Regional Development, Regional Studies, 22, 33-48.
Florida, Richard L., Donald F. Smith and Elizabeth Sechoka (1991): Regional
patterns of venture capital investment, in: Green, Milford (ed.), Venture
Capital: International Comparisons, London and New York: Routledge
1991, 102-133.
Fried, Vance H. and Robert D. Hisrich (1995): The Venture Capitalist: A
Relationship Investor, California Management Review, 37, 101-113.
Fritsch, Michael and Viktor Slavtchev (2005): The Role of Regional Knowledge
Sources for Innovation – An Empirical Assessment, Technical University
Bergakademie Freiberg, Faculty of Economics and Business
Administration,Working Paper 15/2005.
Fritsch, Michael and Viktor Slavtchev (2006): Academic Institutions and
Innovation in Space, Technical University Bergakademie Freiberg (mimeo).
German Private Equity and Venture Capital Association (2005): press release,
Berlin: 3rd May 2005.
Gompers Paul A. (1995): Optimal Investment, Monitoring, and the Staging of
Venture Capital, The Journal of Finance, 6, 1461-1489.
Gompers, Paul A. and Joshua Lerner (2001): The Venture Capital Revolution,
Journal of Economic Perspectives, 15(2), 145-168.
Green, Milford B. (1991): Preferences for US Venture Capital Investments 1970-
1988, in: Green, Milford (ed.), Venture Capital: International Comparisons,
London and New York: Routledge 1991, 18-58.
 28

Gupta, Anil K. and Harry J. Sapienza (1992): Determinants of Venture Capital

Firms’ Preferences Regarding the Industry Diversity and Geographic Scope
of their Investments, Journal of Business Venturing, 7, 347-362.
Harding, Rebecca (2000): Venture capital and regional development: towards a
venture capital ‘system’, Venture Capital, 2, 287-311.
Hellmann Thomas and Manju Puri (2002): Venture Capital and the
Professionalization of Start-Up Firms: Empirical Evidence, Journal of
Finance, 57, 169-197.
Kaplan, Steven N. and Per Strömberg (2004): Characteristics, Contracts, and
Actions: Evidence from Venture Capitalist Analyses, Journal of Finance,
59, 2177-2210.
Leinbach, Thomas R. and Carl Amrhein (1987) A Geography of the Venture
Capital Industry in the U.S., Professional Geographer, 39(2), 146-158.
Lerner, Joshua (1994): The Syndication of Venture Capital Investments,
Financial Management, 23, 16-27.
Lerner, Joshua (1995): Venture Capitalists and the Oversight of Private Firms,
Journal of Finance, 50, 301-318.
Lockett, Andy and Mike Wright (2001): The syndication of venture capital
investments, Omega, 29, 175-190.
Macmillan Ian C., David M. Kulow and Roubina Khoylian (1988): Venture
Capitalists’ Involvement in Their Investments: Extent and Performance,
Kirchhoff Bruce A. et al (eds.), Frontiers of Entrepreneurship Research,
303-323.
Martin, Ron (1989): The Growth and Geographical Anatomy of Venture
Capitalism in the United Kingdom, Regional Studies, 23, 389-403.
Martin, Ron, Peter Sunley, Dave Turner (2002): Taking Risks in Regions: the
Geographical Anatomy of Europe’s Emerging Venture Capital Market,
Journal of Economic Geography, 2, 121-150.
Martin, Ron, Christian Berndt, Britta Klagge, Peter Sunley (2005): Spatial
Proximity Effects and Regional Equity Gaps in the Venture Capital Market:
Evidence form Germany and the United Kingdom, Environment and
Planning A, 37, 1207-1231.
Mason, Colin M and Richard T. Harrison (1999): Financing Entrepreneurship:
Venture Capital and Regional Development, in: Martin, Ron (ed.), Money
and the Space Economy, Chichester: Wiley, 157-183.
Mason, Colin M and Richard T. Harrison (2002a): The Geography of Venture
Capital Investments in the UK, Transactions of the Institute of British
Geographers, 27, 427-451.
Mason, Colin M and Richard T. Harrison (2002b): The Barriers to investment in
the informal venture capital sector, Entrepreneurship and Regional
Development, 14, 271-287.
 29

Petersen, Mitchell A. and Raghuram G. Rajan (2002): Does Distance Still Matter?
The Information Revolution in Small Business Lending, Journal of Finance,
57, 2533-2570.
Powell Walter W., Kenneth W.Koput, Bowie James I. and Laurel Smith-Doerrs
(2002): The Spatial Clustering of Science and Capital: Accounting for
Biotech Firm-Venture Capital Relationships, Regional Studies, 36(3), 291-
205.
Schäfer, Dorothea and Dirk Schilder (2006): Informed Capital in a Hostile
Environment – The Case of Relational Investors in Germany, DIW
Discussion Paper, No. 549.
Schilder, Dirk (2006): Private versus public Venture Capital - Complementary or
competitive?, Technical University Bergakademie Freiberg (mimeo).
Sahlman, William A. (1990): The Structure of Governance of Venture-Capital
Organizations, Journal of Financial Economics, 27, 473-521.
Sapienza, Harry J. (1992): When Do Venture Capitalists Add Value, Journal of
Business Venturing, 7, 9-27.
Sapienza, Harry J. and Anil K. Gupta (1994): Impact of Agency Risks and Task
Uncertainty on Venture Capitalis – CEO Interaction, Academy of
Management Journal, 37 (6), 1618-1632.
Sapienza, Harry J, Sophie Manigart and Wim Vermeir (1996): Venture Capitalist
Governance and Value Added in Four Countries, Journal of Business
Venturing, 11, 439-469.
Sorensen, Olav and Toby E Stuart (2001): Syndication Networks and the Spatial
Distribution of Venture Capital Investments, American Journal of
Sociology, 106, 1546-1588.
Sunley, Peter, Britta Klagge, Christian Berndt and Ron Martin (2005): Venture
capital programmes in the UK and Germany: In what sense regional policy?
Regional Studies, 39, 255-273.
Thompson, Chris (1989): The Geography of Venture Capital, Progress in Human
Geography, 13, 62-98.
Tykvova, Tereza (2004): Who are the True Venture Capitalists? ZEW Discussion
Paper, No. 04-16.
Wright, Mike and Andy Lockett (2003): The Structure and Management of
Alliances: Syndication in the Venture Capital Industry, Journal of
Management Studies, 40, 2073-2102.
List of Working Papers of the Faculty of Economics and Business Administration,
Technische Universität Bergakademie Freiberg.

2000

00/1 Michael Nippa, Kerstin Petzold, Ökonomische Erklärungs- und Gestaltungsbeiträge des Realoptionen-Ansatzes,
Januar.

00/2 Dieter Jacob, Aktuelle baubetriebliche Themen – Sommer 1999, Januar.

00/3 Egon P. Franck, Gegen die Mythen der Hochschulreformdiskussion – Wie Selektionsorientierung, Nonprofit-
Verfassungen und klassische Professorenbeschäftigungsverhältnisse im amerikanischen Hochschulwesen
zusammenpassen, erscheint in: Zeitschrift für Betriebswirtschaft (ZfB), 70. (2000).

00/4 Jan Körnert, Unternehmensgeschichtliche Aspekte der Krisen des Bankhauses Barings 1890 und 1995, in:
Zeitschrift für Unternehmensgeschichte, München, 45 (2000), 205 – 224.

00/5 Egon P. Franck, Jens Christian Müller, Die Fußball-Aktie: Zwischen strukturellen Problemen und First-Mover-
Vorteilen, Die Bank, Heft 3/2000, 152 – 157.

00/6 Obeng Mireku, Culture and the South African Constitution: An Overview, Februar.

00/7 Gerhard Ring, Stephan Oliver Pfaff, CombiCar: Rechtliche Voraussetzungen und rechtliche Ausgestaltung
eines entsprechenden Angebots für private und gewerbliche Nutzer, Februar.

00/8 Michael Nippa, Kerstin Petzold, Jamina Bartusch, Neugestaltung von Entgeltsystemen, Besondere
Fragestellungen von Unternehmen in den Neuen Bundesländern – Ein Beitrag für die Praxis, Februar.

00/9 Dieter Welz, Non-Disclosure and Wrongful Birth , Avenues of Liability in Medical Malpractice Law, März.

00/10 Jan Körnert, Karl Lohmann, Zinsstrukturbasierte Margenkalkulation, Anwendungen in der Marktzinsmethode
und bei der Analyse von Investitionsprojekten, März.

00/11 Michael Fritsch, Christian Schwirten, R&D cooperation between public research institutions - magnitude,
motives and spatial dimension, in: Ludwig Schätzl und Javier Revilla Diez (eds.), Technological Change and
Regional Development in Europe, Heidelberg/New York 2002: Physica, 199 – 210.

00/12 Diana Grosse, Eine Diskussion der Mitbestimmungsgesetze unter den Aspekten der Effizienz und der
Gerechtigkeit, März.

00/13 Michael Fritsch, Interregional differences in R&D activities – an empirical investigation, in: European
Planning Studies, 8 (2000), 409 – 427.

00/14 Egon Franck, Christian Opitz, Anreizsysteme für Professoren in den USA und in Deutschland – Konsequenzen
für Reputationsbewirtschaftung, Talentallokation und die Aussagekraft akademischer Signale, in: Zeitschrift
Führung + Organisation (zfo), 69 (2000), 234 – 240.

00/15 Egon Franck, Torsten Pudack, Die Ökonomie der Zertifizierung von Managemententscheidungen durch
Unternehmensberatungen, April.

00/16 Carola Jungwirth, Inkompatible, aber dennoch verzahnte Märkte: Lichtblicke im angespannten Verhältnis von
Organisationswissenschaft und Praxis, Mai.

00/17 Horst Brezinski, Der Stand der wirtschaftlichen Transformation zehn Jahre nach der Wende, in: Georg
Brunner (Hrsg.), Politische und ökonomische Transformation in Osteuropa, 3. Aufl., Berlin 2000, 153 – 180.

00/18 Jan Körnert, Die Maximalbelastungstheorie Stützels als Beitrag zur einzelwirtschaftlichen Analyse von
Dominoeffekten im Bankensystem, in: Eberhart Ketzel, Stefan Prigge u. Hartmut Schmidt (Hrsg.), Wolfgang
Stützel – Moderne Konzepte für Finanzmärkte, Beschäftigung und Wirtschaftsverfassung, Verlag J. C. B.
Mohr (Paul Siebeck), Tübingen 2001, 81 – 103.

00/19 Cornelia Wolf, Probleme unterschiedlicher Organisationskulturen in organisationalen Subsystemen als

mögliche Ursache des Konflikts zwischen Ingenieuren und Marketingexperten, Juli.

00/20 Egon Franck, Christian Opitz, Internet-Start-ups – Ein neuer Wettbewerber unter den „Filteranlagen“ für
Humankapital, erscheint in: Zeitschrift für Betriebswirtschaft (ZfB), 70 (2001).
00/21 Egon Franck, Jens Christian Müller, Zur Fernsehvermarktung von Sportligen: Ökonomische Überlegungen am
Beispiel der Fußball-Bundesliga, erscheint in: Arnold Hermanns und Florian Riedmüller (Hrsg.),
Management-Handbuch Sportmarketing, München 2001.

00/22 Michael Nippa, Kerstin Petzold, Gestaltungsansätze zur Optimierung der Mitarbeiter-Bindung in der IT-
Industrie - eine differenzierende betriebswirtschaftliche Betrachtung -, September.

00/23 Egon Franck, Antje Musil, Qualitätsmanagement für ärztliche Dienstleistungen – Vom Fremd- zum
Selbstmonitoring, September.

00/24 David B. Audretsch, Michael Fritsch, Growth Regimes over Time and Space, Regional Studies, 36 (2002), 113
– 124.

00/25 Michael Fritsch, Grit Franke, Innovation, Regional Knowledge Spillovers and R&D Cooperation, Research
Policy, 33 (2004), 245-255.

00/26 Dieter Slaby, Kalkulation von Verrechnungspreisen und Betriebsmittelmieten für mobile Technik als
Grundlage innerbetrieblicher Leistungs- und Kostenrechnung im Bergbau und in der Bauindustrie, Oktober.

00/27 Egon Franck, Warum gibt es Stars? – Drei Erklärungsansätze und ihre Anwendung auf verschiedene Segmente
des Unterhaltungsmarktes, Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik, 81 (2001), 59 – 64.

00/28 Dieter Jacob, Christop Winter, Aktuelle baubetriebliche Themen – Winter 1999/2000, Oktober.

00/29 Michael Nippa, Stefan Dirlich, Global Markets for Resources and Energy – The 1999 Perspective - , Oktober.

00/30 Birgit Plewka, Management mobiler Gerätetechnik im Bergbau: Gestaltung von Zeitfondsgliederung und
Ableitung von Kennziffern der Auslastung und Verfügbarkeit, Oktober.

00/31 Michael Nippa, Jan Hachenberger, Ein informationsökonomisch fundierter Überblick über den Einfluss des
Internets auf den Schutz Intellektuellen Eigentums, Oktober.

00/32 Egon Franck, The Other Side of the League Organization – Efficiency-Aspects of Basic Organizational
Structures in American Pro Team Sports, Oktober.

00/33 Jan Körnert, Cornelia Wolf, Branding on the Internet, Umbrella-Brand and Multiple-Brand Strategies of
Internet Banks in Britain and Germany, erschienen in Deutsch: Die Bank, o. Jg. (2000), 744 – 747.

00/34 Andreas Knabe, Karl Lohmann, Ursula Walther, Kryptographie – ein Beispiel für die Anwendung
mathematischer Grundlagenforschung in den Wirtschaftswissenschaften, November.

00/35 Gunther Wobser, Internetbasierte Kooperation bei der Produktentwicklung, Dezember.

00/36 Margit Enke, Anja Geigenmüller, Aktuelle Tendenzen in der Werbung, Dezember.

2001

01/1 Michael Nippa, Strategic Decision Making: Nothing Else Than Mere Decision Making? Januar.

01/2 Michael Fritsch, Measuring the Quality of Regional Innovation Systems – A Knowledge Production Function
Approach, International Regional Science Review, 25 (2002), 86-101.

01/3 Bruno Schönfelder, Two Lectures on the Legacy of Hayek and the Economics of Transition, Januar.

01/4 Michael Fritsch, R&D-Cooperation and the Efficiency of Regional Innovation Activities, Cambridge Journal of
Economics, 28 (2004), 829-846.

01/5 Jana Eberlein, Ursula Walther, Änderungen der Ausschüttungspolitik von Aktiengesellschaften im Lichte der
Unternehmenssteuerreform, Betriebswirtschaftliche Forschung und Praxis, 53 (2001), 464 - 475.

01/6 Egon Franck, Christian Opitz, Karriereverläufe von Topmanagern in den USA, Frankreich und Deutschland –
Elitenbildung und die Filterleistung von Hochschulsystemen, Schmalenbachs Zeitschrift für
betriebswirtschaftliche Forschung (zfbf), (2002).

01/7 Margit Enke, Anja Geigenmüller, Entwicklungstendenzen deutscher Unternehmensberatungen, März.

01/8 Jan Körnert, The Barings Crises of 1890 and 1995: Causes, Courses, Consequences and the Danger of Domino
Effects, Journal of International Financial Markets, Institutions & Money, 13 (2003), 187 – 209.

01/9 Michael Nippa, David Finegold, Deriving Economic Policies Using the High-Technology Ecosystems
Approach: A Study of the Biotech Sector in the United States and Germany, April.

01/10 Michael Nippa, Kerstin Petzold, Functions and roles of management consulting firms – an integrative
theoretical framework, April.

01/11 Horst Brezinski, Zum Zusammenhang zwischen Transformation und Einkommensverteilung, Mai.

01/12 Michael Fritsch, Reinhold Grotz, Udo Brixy, Michael Niese, Anne Otto, Gründungen in Deutschland:
Datenquellen, Niveau und räumlich-sektorale Struktur, in: Jürgen Schmude und Robert Leiner (Hrsg.),
Unternehmensgründungen - Interdisziplinäre Beiträge zum Entrepreneurship Research, Heidelberg 2002:
Physica, 1 – 31.

01/13 Jan Körnert, Oliver Gaschler, Die Bankenkrisen in Nordeuropa zu Beginn der 1990er Jahre - Eine Sequenz aus
Deregulierung, Krise und Staatseingriff in Norwegen, Schweden und Finnland, Kredit und Kapital, 35 (2002),
280 – 314.

01/14 Bruno Schönfelder, The Underworld Revisited: Looting in Transition Countries, Juli.

01/15 Gert Ziener, Die Erdölwirtschaft Russlands: Gegenwärtiger Zustand und Zukunftsaussichten, September.

01/16 Margit Enke, Michael J. Schäfer, Die Bedeutung der Determinante Zeit in Kaufentscheidungsprozessen,
September.

01/17 Horst Brezinski, 10 Years of German Unification – Success or Failure? September.

01/18 Diana Grosse, Stand und Entwicklungschancen des Innovationspotentials in Sachsen in 2000/2001, September.

2002

02/1 Jan Körnert, Cornelia Wolf, Das Ombudsmannverfahren des Bundesverbandes deutscher Banken im Lichte
von Kundenzufriedenheit und Kundenbindung, in: Bank und Markt, 31 (2002), Heft 6, 19 – 22.

02/2 Michael Nippa, The Economic Reality of the New Economy – A Fairytale by Illusionists and Opportunists,
Januar.

02/3 Michael B. Hinner, Tessa Rülke, Intercultural Communication in Business Ventures Illustrated by Two Case
Studies, Januar.

02/4 Michael Fritsch, Does R&D-Cooperation Behavior Differ between Regions? Industry and Innovation, 10
(2003), 25-39.

02/5 Michael Fritsch, How and Why does the Efficiency of Regional Innovation Systems Differ? in: Johannes Bröcker,
Dirk Dohse and Rüdiger Soltwedel (eds.), Innovation Clusters and Interregional Competition, Berlin 2003:
Springer, 79-96.

02/6 Horst Brezinski, Peter Seidelmann, Unternehmen und regionale Entwicklung im ostdeutschen
Transformationsprozess: Erkenntnisse aus einer Fallstudie, März.

02/7 Diana Grosse, Ansätze zur Lösung von Arbeitskonflikten – das philosophisch und psychologisch fundierte
Konzept von Mary Parker Follett, Juni.

02/8 Ursula Walther, Das Äquivalenzprinzip der Finanzmathematik, Juli.

02/9 Bastian Heinecke, Involvement of Small and Medium Sized Enterprises in the Private Realisation of Public
Buildings, Juli.

02/10 Fabiana Rossaro, Der Kreditwucher in Italien – Eine ökonomische Analyse der rechtlichen Handhabung,
September.

02/11 Michael Fritsch, Oliver Falck, New Firm Formation by Industry over Space and Time: A Multi-Level
Analysis, Oktober.
02/12 Ursula Walther, Strategische Asset Allokation aus Sicht des privaten Kapitalanlegers, September.
02/13 Michael B. Hinner, Communication Science: An Integral Part of Business and Business Studies? Dezember.

2003

03/1 Bruno Schönfelder, Death or Survival. Post Communist Bankruptcy Law in Action. A Survey, Januar.

03/2 Christine Pieper, Kai Handel, Auf der Suche nach der nationalen Innovationskultur Deutschlands – die
Etablierung der Verfahrenstechnik in der BRD/DDR seit 1950, März.

03/3 Michael Fritsch, Do Regional Systems of Innovation Matter? in: Kurt Huebner (ed.): The New Economy in
Transatlantic Perspective - Spaces of Innovation, Abingdon 2005: Routledge, 187-203.

03/4 Michael Fritsch, Zum Zusammenhang zwischen Gründungen und Wirtschaftsentwicklung, in Michael Fritsch
und Reinhold Grotz (Hrsg.), Empirische Analysen des Gründungsgeschehens in Deutschland, Heidelberg
2004: Physica 199-211.

03/5 Tessa Rülke, Erfolg auf dem amerikanischen Markt

03/6 Michael Fritsch, Von der innovationsorientierten Regionalförderung zur regionalisierten Innovationspolitik, in:
Michael Fritsch (Hrsg.): Marktdynamik und Innovation – Zum Gedenken an Hans-Jürgen Ewers, Berlin 2004:
Duncker & Humblot, 105-127.

03/7 Isabel Opitz, Michael B. Hinner (Editor), Good Internal Communication Increases Productivity, Juli.

03/8 Margit Enke, Martin Reimann, Kulturell bedingtes Investorenverhalten – Ausgewählte Probleme des
Kommunikations- und Informationsprozesses der Investor Relations, September.

03/9 Dieter Jacob, Christoph Winter, Constanze Stuhr, PPP bei Schulbauten – Leitfaden Wirtschaftlichkeitsver-
gleich, Oktober.

03/10 Ulrike Pohl, Das Studium Generale an der Technischen Universität Bergakademie Freiberg im Vergleich zu
Hochschulen anderer Bundesländer (Niedersachsen, Mecklenburg-Vorpommern) – Ergebnisse einer
vergleichenden Studie, November.

2004

04/1 Michael Fritsch, Pamela Mueller, The Effects of New Firm Formation on Regional Development over Time,
Regional Studies, 38 (2004), 961-975.

04/2 Michael B. Hinner, Mirjam Dreisörner, Antje Felich, Manja Otto, Business and Intercultural Communication
Issues – Three Contributions to Various Aspects of Business Communication, Januar.

04/3 Michael Fritsch, Andreas Stephan, Measuring Performance Heterogeneity within Groups – A Two-
Dimensional Approach, Januar.

04/4 Michael Fritsch, Udo Brixy, Oliver Falck, The Effect of Industry, Region and Time on New Business Survival
– A Multi-Dimensional Analysis, Januar.

04/5 Michael Fritsch, Antje Weyh, How Large are the Direct Employment Effects of New Businesses? – An
Empirical Investigation, März.

04/6 Michael Fritsch, Pamela Mueller, Regional Growth Regimes Revisited – The Case of West Germany, in: Michael
Dowling, Jürgen Schmude and Dodo von Knyphausen-Aufsess (eds.): Advances in Interdisciplinary European
Entrepreneurship Research Vol. II, Münster 2005: LIT, 251-273.

04/7 Dieter Jacob, Constanze Stuhr, Aktuelle baubetriebliche Themen – 2002/2003, Mai.

04/8 Michael Fritsch, Technologietransfer durch Unternehmensgründungen – Was man tun und realistischerweise
erwarten kann, in: Michael Fritsch and Knut Koschatzky (eds.): Den Wandel gestalten – Perspektiven des
Technologietransfers im deutschen Innovationssystem, Stuttgart 2005: Fraunhofer IRB Verlag, 21-33.

04/9 Michael Fritsch, Entrepreneurship, Entry and Performance of New Businesses – Compared in two Growth
Regimes: East and West Germany, in: Journal of Evolutionary Economics, 14 (2004), 525-542.
04/10 Michael Fritsch, Pamela Mueller, Antje Weyh, Direct and Indirect Effects of New Business Formation on
Regional Employment, Juli.

04/11 Jan Körnert, Fabiana Rossaro, Der Eigenkapitalbeitrag in der Marktzinsmethode, in: Bank-Archiv (ÖBA),
Springer-Verlag, Berlin u. a., ISSN 1015-1516. Jg. 53 (2005), Heft 4, 269-275.

04/12 Michael Fritsch, Andreas Stephan, The Distribution and Heterogeneity of Technical Efficiency within
Industries – An Empirical Assessment, August.

04/13 Michael Fritsch, Andreas Stephan, What Causes Cross-industry Differences of Technical Efficiency? – An
Empirical Investigation, November.

04/14 Petra Rünger, Ursula Walther, Die Behandlung der operationellen Risiken nach Basel II - ein Anreiz zur
Verbesserung des Risikomanagements? Dezember.

2005

05/1 Michael Fritsch, Pamela Mueller, The Persistence of Regional New Business Formation-Activity over Time –
Assessing the Potential of Policy Promotion Programs, Januar.

05/2 Dieter Jacob, Tilo Uhlig, Constanze Stuhr, Bewertung der Immobilien von Akutkrankenhäusern der
Regelversorgung unter Beachtung des neuen DRG-orientierten Vergütungssystems für stationäre Leistungen,
Januar.

05/3 Alexander Eickelpasch, Michael Fritsch, Contests for Cooperation – A New Approach in German Innovation
Policy, April.
05/4 Fabiana Rossaro, Jan Körnert, Bernd Nolte, Entwicklung und Perspektiven der Genossenschaftsbanken Italiens, in:
Bank-Archiv (ÖBA), Springer-Verlag, Berlin u. a., ISSN 1015-1516, Jg. 53 (2005), Heft 7, 466-472.
05/5 Pamela Mueller, Entrepreneurship in the Region: Breeding Ground for Nascent Entrepreneurs? Mai.
05/6 Margit Enke, Larissa Greschuchna, Aufbau von Vertrauen in Dienstleistungsinteraktionen durch Instrumente der
Kommunikationspolitik – dargestellt am Beispiel der Beratung kleiner und mittlerer Unternehmen, Mai.
05/7 Bruno Schönfelder, The Puzzling Underuse of Arbitration in Post-Communism – A Law and Economics Analysis.
Juni.

05/8 Andreas Knabe, Ursula Walther, Zur Unterscheidung von Eigenkapital und Fremdkapital – Überlegungen zu
alternativen Klassifikationsansätzen der Außenfinanzierung, Juli.

05/9 Andreas Ehrhardt, Michael Nippa, Far better than nothing at all - Towards a contingency-based evaluation of
management consulting services, Juli

05/10 Loet Leydesdorff, Michael Fritsch, Measuring the Knowledge Base of Regional Innovation Systems in Germany
in terms of a Triple Helix Dynamics, Juli.

05/11 Margit Enke, Steffi Poznanski, Kundenintegration bei Finanzdienstleistungen, Juli.

05/12 Olga Minuk, Fabiana Rossaro, Ursula Walther, Zur Reform der Einlagensicherung in Weißrussland - Kritische
Analyse und Vergleich mit dem Deutschen Einlagensicherungssystem, August.

05/13 Brit Arnold, Larissa Greschuchna, Hochschulen als Dienstleistungsmarken – Besonderheiten beim Aufbau einer
Markenidentität, August.

05/14 Bruno Schönfelder, The Impact of the War 1991 – 1995 on the Croatian Economy – A Contribution to the
Analysis of War Economies, August.

05/15 Michael Fritsch, Viktor Slavtchev, The Role of Regional Knowledge Sources for Innovation – An Empirical
Assessment, August.

05/16 Pamela Mueller, Exploiting Entrepreneurial Opportunities: The Impact of Entrepreneurship on Economic Growth,
August.

05/17 Pamela Mueller, Exploring the Knowledge Filter: How Entrepreneurship and University-Industry Relations Drive
Economic Growth, September.
05/18 Marc Rodt, Klaus Schäfer, Absicherung von Strompreisrisiken mit Futures: Theorie und Empirie, September.

05/19 Klaus Schäfer, Johannes Pohn-Weidinger, Exposures and Exposure Heding in Exchange Rate Risk Management,
September.
2006

06/1 Michael Nippa, Jens Grigoleit, Corporate Governance ohne Vertrauen? Ökonomische Konsequenzen der Agency-
Theorie, Januar.

06/2 Tobias Henning, Pamela Mueller, Michael Niese, Das Gründungsgeschehen in Dresden, Rostock und Karlsruhe:
Eine Betrachtung des regionalen Gründungspotenzials, Januar.

06/3 Dorothea Schäfer, Dirk Schilder, Informed Capital in a Hostile Environment – The Case of Relational Investors in
Germany, Januar.

06/4 Oleg Badunenko, Michael Fritsch, Andreas Stephan, Allocative Efficiency Measurement Revisited – Do We
Really Need Input Prices? Januar.

06/5 Diana Grosse, Robert Ullmann, Enrico Weyh, Die Führung innovativer Teams unter Berücksichtigung rechtlicher
und psychologischer Aspekte, März.

06/6 Silvia Rogler, Vergleichbarkeit von Gesamt- und Umsatzkostenverfahren – Auswirkungen auf die
Jahresabschlussanalyse, März.