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The spatial clustering of innovation and venture capital

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The spatial clustering of innovation and venture capital Purpose Subject and research question Theoretical approach Project focus The knowledge-based economy/ new ... – PowerPoint PPT presentation

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Title: The spatial clustering of innovation and venture capital


1
The spatial clustering of innovation and venture
capital
  • Purpose
  • Subject and research question
  • Theoretical approach

2
Project focus
  • The knowledge-based economy/new economy
  • Two characteristic features
  • 1) Venture Capital - vital for financing
    innovation and entrepreneurship
  • 2) Venture Capital - clustered in larger cities
    (network and agglomeration)

3
Research questions
  • How well developed is the venture capital market
    in different regions/cities in Norway and how are
    different investors as owners?
  • What competitive advantages have large cities for
    developing specialised financial functions?
  • Is there a large variation in the financing of
    knowledge-based firms in the different
    regions/cities?
  • What role can public policy play in developing
    venture capital markets?

4
Venture capital
  • Financing high-risk and high-return businesses
    (innovation/NTBFs)
  • Long timeframe (3-7 year investment)
  • Hands-on investment
  • Returns - capital gains not dividends
  • Venture capital firms/Business angels

5
Theory and research
  • Financial theory
  • Economic geography
  • Economic sociology

6
The embeddedness approach
  • Economic transactions are embedded in social
    relation and networks
  • The structure of relationships influence
    VC-investments for two reasons
  • Information of investments opportunities
  • Evaluation of investments opportunities

7
Strength of interpersonal ties
  • Amount of time
  • The emotional intensity
  • The intimacy (mutual confiding)
  • The reciprocal service
  • (Granovetter 1973)

8
Social relations and ties
  • How social embeddedness affects an organisations
    acquisition and cost of financial capital
  • Arms-length ties (weak ties)
  • Socially embedded ties (strong ties)
  • (Granovetter 1973, 1985, Uzzi 1996, 1999)

9
Arms-length ties
  • Lean and sporadic transactions
  • The main propositions related to arms-length
    ties is that they determine the degree to which
    an actor can access heterogeneous information in
    a market (Uzzi 1999482)

10
Socially embedded ties
  • Strong, personal and frequent relations
  • Transfer of private resources and information and
    self-enforcing governance
  • Information that must be voluntarily transferred
    in an exchange
  • (Uzzi 1999483)

11
Geographical explanations of spatial
concentration
  • Labour market externalities
  • Demand for intermediate services
  • Technological spillovers
  • Socio-cultural factors

12
Sociological explanations of spatial
concentration
  • Spatial clustering of social and professional
    relations
  • Entrepreneurial process - embedded relations
    among relevant actors
  • Timely, reliable and high-quality information
    produce localised pattern of exchange (Sorenson
    and Stuart 2001)
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