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Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis

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  • Andrea Schertler

Abstract

Using dynamic panel estimations, this paper identifies driving forces of venture capital activity for Western European countries. Driving forces might be the liquidity of stock markets, human capital endowment, and labour market rigidities. The paper shows that these factors do not affect expansion stage investments used as a broader definition of venture capital, while they positively affect early stage investments used as a narrow definition. Thus, the results suggest not only that liquid stock markets play an important role for the development of venture capital markets but also that they are not the only factor that drives venture capital activity. This paper is part of the project European Integration, Financial Systems and Corporate Performance (EIFC) carried out within the European Commission’s specific programme “Improving the Human Research Potential and the Socio-Economic Knowledge Base”. Financial support from the European Union, DG Research (Contract No. HPSE—CT—1999—00039), is gratefully acknowledged. The project homepage is maintained by Dr. Anthony Bartzokas at www.intech.unu.edu/whoswho/index.htm

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1172.

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Length: 33 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:kie:kieliw:1172

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Keywords: venture capital investments; Europe; dynamic panel;

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References

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  1. Amit, Raphael & Brander, James & Zott, Christoph, 1998. "Why do venture capital firms exist? theory and canadian evidence," Journal of Business Venturing, Elsevier, vol. 13(6), pages 441-466, November.
  2. James M. Poterba, 1989. "Venture Capital and Capital Gains Taxation," NBER Working Papers 2832, National Bureau of Economic Research, Inc.
  3. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, Elsevier, vol. 65(1), pages 9-15, October.
  4. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, Elsevier, vol. 47(3), pages 243-277, March.
  5. Dirk Engel, 2003. "Höheres Beschäftigungswachstum durch Venture Capital?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(1), pages 1-22.
  6. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "Investor Protection and Corporate Governance," Working Paper 19455, Harvard University OpenScholar.
  7. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, Elsevier, vol. 27(2), pages 473-521, October.
  8. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, Elsevier, vol. 6(3), pages 241-289, September.
  9. Laura Bottazzi & Marco Da Rin, . "Europe’s ‘New’ Stock Markets," Working Papers 218, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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Citations

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Cited by:
  1. Groh, Alexander Peter & von Liechtenstein, Heinrich & Lieser, Karsten, 2010. "The European Venture Capital and Private Equity country attractiveness indices," Journal of Corporate Finance, Elsevier, Elsevier, vol. 16(2), pages 205-224, April.
  2. Groh, Alexander Peter & von Liechtenstein, Heinrich, 2009. "How attractive is central Eastern Europe for risk capital investors?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(4), pages 625-647, June.
  3. van Pottelsberghe de la Potterie, Bruno & Romain, Astrid, 2004. "The Determinants of Venture Capital: Additional Evidence," Discussion Paper Series 1: Economic Studies 2004,19, Deutsche Bundesbank, Research Centre.
  4. Groh, Alexander P. & Liechtenstein, Heinrich & Canela, Miguel A., 2008. "Limited partners' perceptions of the Central Eastern European venture capital and private equity market," IESE Research Papers, IESE Business School D/727, IESE Business School.
  5. Francesco Bogliacino & Matteo Lucchese, 2011. "Access to finance for innovation: the role of venture capital and the stock market," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, FrancoAngeli Editore, vol. 2011(4), pages 165-183.
  6. Elisabete Gomes Santana Felix & Cesaltina Pires & Mohamed Azzim Gulamhussenb, 2007. "The Determinants of Venture Capital in Europe - Evidence Across Countries," CEFAGE-UE Working Papers 2007_01, University of Evora, CEFAGE-UE (Portugal).
  7. Groh, Alexander P. & Liectenstein, Heinrich, 2009. "The first step of the capital flow from institutions to entrepreneurs: The criteria for sorting venture capital funds," IESE Research Papers, IESE Business School D/795, IESE Business School.
  8. repec:diw:diwfin:diwfin03050 is not listed on IDEAS
  9. Kerstin Bernoth & Roberta Colavecchio & Magdolna Sass, 2010. "Drivers of Private Equity Investment in CEE and Western European Countries," Working Paper / FINESS, DIW Berlin, German Institute for Economic Research 3.5, DIW Berlin, German Institute for Economic Research.
  10. Groh, Alexander P. & Liechtenstein, Heinrich & Lieser, Karsten, 2008. "The European venture capital and private equity country attractiveness index(es)," IESE Research Papers, IESE Business School D/773, IESE Business School.
  11. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers, Universitätsbibliothek Wuppertal, University Library sdp09004, Universitätsbibliothek Wuppertal, University Library.
  12. Karim Chaabouni, 2011. "Determinants And Legitimacy Of Venture Capital Financing: An Empirical Verification," Anadolu University Journal of Social Sciences, Anadolu University, Anadolu University, vol. 11(1), pages 27-38, January.
  13. Michael Stolpe, 2004. "Europe's Entry into the Venture Capital Business: Efficiency and Policy," Kiel Working Papers 1223, Kiel Institute for the World Economy.
  14. José Martí Pellón & Marina Balboa, 2003. "Characterisation Of The Reputation Of Private Equity Managers: Evidence In Spain," Working Papers. Serie EC, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2003-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  15. Roland Füss & Denis Schweizer, 2012. "Short and long-term interactions between venture capital returns and the macroeconomy: evidence for the United States," Review of Quantitative Finance and Accounting, Springer, Springer, vol. 38(3), pages 391-410, April.
  16. Groh, Alexander P., 2009. "Private equity in emerging markets," IESE Research Papers, IESE Business School D/779, IESE Business School.
  17. Stefano Bonini & Senem Alkan, 2012. "The political and legal determinants of venture capital investments around the world," Small Business Economics, Springer, Springer, vol. 39(4), pages 997-1016, November.

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