Abstract

High tech start-ups are confronted with severe constraints to finance their growth ambitions. When start-ups are confronted with such financial constraints, they can broadly pursue two external financing strategies. They may seek to be acquired, in order to further develop within a large corporate or they raise external financing, of which venture capital (VC) is an important source. Unfortunately, VC financing is not equally abundant across the U.S. and VC’s typically prefer to invest close to home. However, high tech entrepreneurs, as active agents, do not have to take their environment as given. We therefore examine whether high tech start-ups with financial constraints move their activities to a different state. In a second step, we study whether moving enables these firms to grow independently by attracting venture capital rather than being acquired.

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