IDEAS home Printed from https://ideas.repec.org/a/jda/journl/vol.50year2016issue6pp1-15.html
   My bibliography  Save this article

Nexus between venture capital and economic growth in European economic area countries: The Granger causality approach

Author

Listed:
  • Rudra P. Pradhan
  • Rana P. Maradana
  • Danish B. Zaki
  • Saurav Dash
  • Manju Jayakumar

    (Indian Institute of Technology Kharagpur, India)

Abstract

This paper examines the long-run relationship between venture capital investment and per capita economic growth in the 19 European Economic Area (EEA) countries for the period 1989-2014. We use three different indicators of venture capital (VC) investment, namely VC at early stage investment, VC at later stage investment, and VC total investment. Using cointegration technique, the study warrants the support of long-run relationship between VC investment and per capita economic growth in a few cases, typically with reference to a particular VC indicator and per capita economic growth we use. Using vector auto-regressive (VAR) model for testing the Granger causalities, the study acknowledges mixed evidence of the relationship between the venture capital investment and per capita economic growth in the selected EEA countries, both by individual country and at the panel setting. In some instances, venture capital investment leads to per capita economic growth, lending support to supply-leading hypothesis (SLH) of VC investment-growth nexus. In other instances, it is the per capita economic growth that regulates the level of venture capital investment, lending support to demand-following hypothesis (DFH) of VC investment-growth nexus. There are also circumstances, where venture capital investment and per capita economic growth are mutually interdependent. That is the situation where both are self-reinforcing and offer support to feedback hypothesis (FBH) of VC investment-growth nexus. In addition, there are also instances, where the venture capital investment and per capita economic growth are independent of each other. This is the situation where both are neutral and offer support to neutrality hypothesis (NLH) of VC investment-growth nexus. To summarize, Granger causality results vary from country to country within the EEA countries, depending upon the type of venture capital investment and per capita economic growth that we use in a particular empirical exploration process. The policy implication of this study is that the economic policies should recognize the differences in the venture capital investment and per capita economic growth in order to maintain sustainable development in these EEA countries.

Suggested Citation

  • Rudra P. Pradhan & Rana P. Maradana & Danish B. Zaki & Saurav Dash & Manju Jayakumar, 2016. "Nexus between venture capital and economic growth in European economic area countries: The Granger causality approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 50(6), pages 1-15, Special I.
    • Handle: RePEc:jda:journl:vol.50:year:2016:issue6:pp:1-15
    as

    Download full text from publisher

    File URL: http://muse.jhu.edu/article/626789
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liaoliao Duan & Dongxiao Niu & Weizeng Sun & Siqi Zheng, 2021. "Transportation infrastructure and capital mobility: evidence from China’s high-speed railways," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(3), pages 617-648, December.
    2. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran & Bennett, Sara E. & Bahmani, Sahar, 2019. "Short-term and long-term dynamics of venture capital and economic growth in a digital economy: A study of European countries," Technology in Society, Elsevier, vol. 57(C), pages 125-134.

    More about this item

    Keywords

    Venture capital; per capita economic growth; Granger causality; EEA countries;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jda:journl:vol.50:year:2016:issue6:pp:1-15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Abu N.M. Wahid (email available below). General contact details of provider: https://edirc.repec.org/data/cbtnsus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.