Abstract
Venture capital has proven to be an essential resource for economic growth, especially in some technological clusters. The focus is on the way the venture capitalist makes the investment decision and the portfolio selection. The aim of this paper is to formulate the venture capital investment problem through the Goal Programming model where the Financial Decision-Maker’s preferences will be explicitly incorporated through the concept of satisfaction functions. The proposed model will be illustrated by using data from an Italian venture capital fund.
Similar content being viewed by others
References
Anagnostopoulos, K. P., & Mamanis, G. (2011). The mean-variance cardinality constrained portfolio optimization problem: an experimental evaluation of five multi-objective evolutionary algorithms. Expert Systems with Applications, 38(11), 14208–14217.
Aouni, B., & La Torre, D. (2010). A generalized stochastic goal programming model. Applied Mathematics and Computation, 215, 4347–4357.
Aouni, B., & Kettani, O. (2001). Goal programming model: a glorious history and a promising future. European Journal of Operational Research, 133(2), 1–7.
Aouni, B., Ben Abdelaziz, F., & Martel, J. M. (2005). Decision-maker’s preferences modeling in the stochastic goal programming. European Journal of Operational Research, 162, 610–618.
Aouni, B., Colapinto, C., & La Torre, D. (2010). Solving stochastic multi-objective programming in portfolio selection through the GP model. Journal of Financial Decision Making, 6(2), 17–30.
Ben Abdelaziz, F., Aouni, B., & El Fayedh, R. (2007). Multi-objective stochastic programming for portfolio selection. European Journal of Operational Research, 177, 1811–1823.
Ben Abdelaziz, F., El Fayedh, R., & Rao, A. (2009). A discrete stochastic goal program for portfolio selection: the case of United Arab Emirates equity market. INFOR. Information Systems and Operational Research, 47(1), 5–13.
Bertsimas, D., & Shioda, R. (2009). Algorithm for cardinality-constrained quadratic optimization. Computational Optimization and Applications, 43, 1–22.
Bienstock, D. (1996). Computational study of a family of mixed-integer quadratic programming problems. Mathematical Programming, 74, 121–140.
Bucci, A., Colapinto, C., Forster, M., & La Torre, D. (2011). Stochastic technology shocks in an extended Uzawa–Lucas model: closed-form solution and long-run dynamics. Journal of Economics, 103(1), 83–99.
Chang, T. J., Meade, N., & Beasley, J. E. (2000a). Heuristics for cardinality constrained portfolio optimization. Computers & Operations Research, 27, 1271–1302.
Chang, T.-J., Meade, N., Beasley, J. E., & Sharaiha, Y. M. (2000b). Heuristics for cardinality constrained portfolio optimization. Mathematical Programming, 74, 121–140.
Colapinto, C. (2007). A way to foster innovation: a venture capital district from Silicon Valley and route 128 to Waterloo Region. International Journal of Economics, 3, 319–343.
Colapinto, C. (2011a). The role of Italian incubators and Science Parks in the Triple-Helix era. The hybrid model developed in Lombardy. International Journal of Technoenterpreneurship, 2(3/4), 290–303.
Colapinto, C. (2011b). Exploring academic entrepreneurship in the Milan area. Industry & Higher Education, 25(1), 1–7.
Colapinto, C., & Porlezza, C. (2012). Innovation in creative industries: from the quadruple helix model to the systems theory. Journal of the Knowledge Economy. doi:10.1007/s13132-011-0051-x.
Etzkowitz, H., & Leydesdorff, L. (2000). The dynamic of innovation: from National System and Mode 2 to a Triple Helix of university-industry-government relations. Research Policy, 29, 109–123.
Fieldsend, J. E., Matatko, J., & Peng, M. (2004). Cardinality constrained portfolio optimisation. In Lecture notes in computer science (Vol. 3177, pp. 788–793).
Gatti, S. (2004) The valuation of the target company. In S. Caselli & S. Gatti (Eds.), Venture capital. A Euro-system approach (pp. 81–121). Heidelberg: Springer.
Gilbert, B. A., Mcdougall, P. P., & Audretsch, D. B. (2006). New venture growth: a review and extension. Journal of Management, 32(6), 926–950.
Hisrich, R. D., & Jankowicz, A. D. (1990). Intuition in venture capital decisions: an exploratory study using a new technique. Journal of Business Venturing, 5, 19–62.
Hofstede, G. (1984). Culture’s consequences: international differences in work-related values. Newbury Park: Sage.
La Torre, D. (2003). On generalized derivatives for C 1,1 vector optimization problems. Journal of Applied Mathematics, 7, 365–376.
Li, D., Sun, X., & Wang, J. (2006). Optimal lot solution to cardinality constrained mean-variance formulation for portfolio selection. Mathematical Finance, 16, 83–101.
Laughun, D. J., Payne, J. W., & Crum, R. (1980). Managerial risk preferences for below target returns. Management Science, 26, 1238–1249.
Manigart, S., Joos, P., & De Vos, D. (1994). The performance of publicly traded European venture capital companies. Journal of Small Business Finance, 3(2), 111–125.
Markowitz, H. M. (1952). Portfolio selection. Journal of Finance, 7, 77–91.
Maringer, D. G., & Kellerer, H. (2003). Optimization of cardinality constrained portfolios with a hybrid local search algorithm. OR-Spektrum, 25, 481–495.
Martel, J.-M., & Aouni, B. (1990). Incorporating the decision–maker’s preferences in the goal programming model. Journal of the Operational Research Society, 41, 1121–1132.
Morgan, G. (1986), Images of organization. Beverly Hills: Sage.
Piol, E. (2004). Il sogno di un’impresa. Dall’Olivetti al venture capital: una vita nell’information technology. Milano: Il Sole 24 Ore Libri.
Poindexter, J. B. (1976). The efficiency of financial markets: the venture capital case. Unpublished doctoral dissertation, New York: New York University.
Romero, C. (1991). Handbook of critical issues in goal programming. Elmsford: Pergamon.
Sawaragi, Y., Nakayama, H., & Tanino, T. (1985). Mathematics in science and engineering: Vol. 176. Theory of multiobjective optimization. Orlando: Academic Press.
Schaffer, M. (1989). Are profit maximizers survivors? Journal of Economic Behavior & Organization, 12, 29–45.
Shaw, D. X., Liu, S., & Kopman, L. (2008). Lagrangian relaxation procedure for cardinality-constrained portfolio optimization. Optimization Methods & Software, 23, 411–420.
Soleimani, H., Golmakani, H. R., & Salimi, M. H. (2009). Markowitz-based portfolio selection with minimum transaction lots, cardinality constraints and regarding sector capitalization using genetic algorithm. Expert Systems with Applications, 36, 5058–5063.
Storey, D. J. (2000). Small business: critical perspectives on business and management. London: Taylor & Francis.
Tyebjee, T. T., & Bruno, A. V. (1984). A model of venture capitalist investment activity. Management Science. Rhode Island: Institute of Management Sciences.
Tyebjee, T., & Vickery, L. (1988). Venture capital in Western Europe. Journal of Business Venturing, 3(2), 123–136.
Wells, W. A. (1974). Venture capital decision-making. Unpublished doctoral dissertation, Carnegie-Mellon.
Zopounidis, C. (1999). Multicriteria decision aid in financial management. European Journal of Operational Research, 119, 404–415.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Aouni, B., Colapinto, C. & La Torre, D. A cardinality constrained stochastic goal programming model with satisfaction functions for venture capital investment decision making. Ann Oper Res 205, 77–88 (2013). https://doi.org/10.1007/s10479-012-1168-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10479-012-1168-4