The Venture Capital Keiretsu Effect: An Empirical Analysis of Strategic Alliances Among Portfolio Firms

By examining joint ventures and strategic alliances among venture capital portfolio firms, this paper examines whether venture capitalists facilitate collaborations within the portfolio.Using a large database of strategic alliances and financing information from Venture Economics,I find evidence of a keiretsu effect,an increase in the probability that a portfolio firm will form an alliance with a partner who shares a common venture capitalist.Because of shortcomings in traditional discrete choice models for this application,I develop a probability model based on sequential sampling that accounts for the interdependence of strategic alliances.