  This paper studies the effect of antitrust enforcement on venture capital
(VC) investments and VC-backed companies. To establish causality, I exploit the
DOJ's decision to close several antitrust field offices in 2013, which reduced
the antitrust enforcement in areas near the closed offices. I find that the
reduction in antitrust enforcement causes a significant decrease in VC
investments in startups located in the affected areas. Furthermore, these
affected VC-backed startups exhibit a reduced likelihood of successful exits
and diminished innovation performance. These negative results are mainly driven
by startups in concentrated industries, where incumbents tend to engage in
anticompetitive behaviors more frequently. To mitigate the adverse effect,
startups should innovate more to differentiate their products. This paper sheds
light on the importance of local antitrust enforcement in fostering competition
and innovation.
