Let your portfolio companies exchange themselves!

Juanita González-Uribe (London School of Economics) studies cross-company exchanges that can help to boost profits from inventions between early-stage companies and venture capital (VC) investors. Her study focuses on portfolio companies’ exchanges of innovation in the United States over a period of 1976-2008. The exchanges in her study are approximated by cross-company patent citations, patent re-assignments, exchanges of workers, M&A as well as strategic alliances. Using an event-time approach, she finds that after the firms join the VC’s portfolio for the first time, exchanges between them and other companies in the VC’s portfolio increase by about 60%. She suggests that new joiners particularly drive this increase. Apart from the main finding, her results also suggest that portfolio exchanges can be used for the portfolio selection conducted by VCs. Overall, results align with the idea that VC’s portfolios can offer complementary resources to encourage and help the portfolio firms.

Read full paper “Exchanges of innovation resources inside venture capital portfolios” by Juanita González-Uribe, Journal of Financial Economics (Available online 25 May 2019) at ScienceDirect.

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