The following is from Sampsa Samila, who will be speaking in the quantitative political science working group on Fri 12 Nov.
The general context is the venture capital industry. What I [Sampla Samila] am thinking is to specify a location for each venture capital firm in a “social space” based on the geographic location and the industry of the companies in which it invests. So the space would have a geographic dimension and an industry dimension and each venture capital firm’s position would be a vector of investments falling in different locations in this space. (There might be a futher dimension based on which other venture capital firms it invests, the network of co-investments.)
The statistical problem then is to assess how much of the movement of a particular venture capital firm in this space is due to the locations of other venture capital firms in this space (do they attract or repel each other and under what conditions?) and how much is due to the success of investments in particular geographic areas and industries (the venture capital firms are generally likely to invest where there are high-quality companies to invest in). Other factors would include the geographic location of the venture capital firm itself and its co-investments with other venture capital firms. In mathematical terms, the problem is to estimate how the characteristics of different locations and the positions of others influence the vector of movement (direction and magnitude). One could also look at where in this space do new venture capital firms appear and in which locations are venture capital firms most likely to fail.
One possible problem could be that the characteristics of the space also depend on the location of the firms. That is, high-quality companies are likely to be established where they have resources and high-quality venture capital is one of them.
The sociological contributions of this project would be to study:
1) the dynamics of competition and legitimation (the benefits one firm gets from being close to a other firms versus the downside of it)
2) the dynamics of social comparison (looking at how success/status differentials between venture capital firms affect whether they attract or repel each other, one can also look at which one moves closer or futher away from the other)
3) clustering of firms together.
Any thoughts?
Jeronimo commented:
Economic theory suggests that if a location has a high level of productivity (human, infrastructure, capital, etc), firms will come up to that place. One way by which you can see if venture capital firms invest where there are high-quality companies to invest in is by looking at the Economic Census and County Business Patterns. With these data you can analyze for instance, the interaction between firms characteristics and geographic location characteristics.