An approach to derive rational investment scale for venture capital sectors

To overcome the drawbacks existing in current deriving rational investment scale (RIS) approaches that evaluation criteria are unilateral and evaluation methods are demoded, a new approach named RISD to derive RIS for venture capital (VC) sectors is proposed on the basis of investment scale preference (ISP) by using data envelopment analysis (DEA) methodology. The ISP is defined on evaluation criteria to enable the originating data available and the principles credible for RISD approach. In terms of ISP, the RISD approach employs a key ratio form of DEA introduced by Banker, Charnes and Cooper to derive RIS with Pareto-optimal property and uses assurance region to ensure the evaluated results are reasonable. Otherwise, scale efficiency for each investment scale that evaluated besides technical efficiency can provide additional information to make decision more scientifically. Applied to a simulation example, the presented model is proved to be scientific, reasonable, and well applicable to real-world RIS deriving problem for VC sectors.