Department of Finance
College of Business
340 Wohlers Hall, MC-706
1206 South Sixth Street
Champaign, IL 61820
Institutional Affiliation: University of Illinois
NBER Working Papers and Publications
|June 2012||The Cost of Friendship|
with Paul Gompers, Vladimir Mukharlyamov: w18141
This paper explores two broad questions on collaboration between individuals. First, we investigate what personal characteristics affect people's desire to work together. Second, given the influence of these personal characteristics, we analyze whether this attraction enhances or detracts from performance. Addressing these problems in the venture capital syndication setting, we show that venture capitalists exhibit strong detrimental homophily in their co-investment decisions. We find that individual venture capitalists choose to collaborate with other venture capitalists for both ability-based characteristics (e.g., whether both individuals in a dyad obtained a degree from a top university) and affinity-based characteristics (e.g., whether individuals in a pair share the same ethnic b...
Published: Paul A. Gompers & Vladimir Mukharlyamov & Yuhai Xuan, 2016. "The cost of friendship," Journal of Financial Economics, vol 119(3), pages 626-644.