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The Effect of Venture Capital on Innovation Strategies

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  • Marco Da Rin
  • María Fabiana Penas

Abstract

We examine a unique dataset of Dutch companies, some of which have received venture financing. The data include detailed information on innovation activities and other company characteristics. We analyse the role of venture finance in influencing innovation strategies. We find that venture capitalists push portfolio companies towards building absorptive capacity and towards more permanent in-house R&D efforts. By contrast, we find that public funding relaxes financial constraints, but does not lead to a build-up of absorptive capacity. Our results thus highlight the special role of venture capital in shaping companies' innovation strategies.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13636.

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Date of creation: Nov 2007
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Publication status: published as Entrepreneurial Financing, Advice, and Agency Costs , Roland Strausz. in Entrepreneurship: Strategy and Structure , Hellmann and Stern. 2009
Handle: RePEc:nbr:nberwo:13636

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Cited by:
  1. Michael Peneder, 2010. "The Impact of Venture Capital on Innovation Behaviour and Firm Growth," WIFO Working Papers, WIFO 363, WIFO.
  2. Christian Keuschnigg, 2008. "Tax Policy for Venture Capital Backed Entrepreneurship," University of St. Gallen Department of Economics working paper series 2008, Department of Economics, University of St. Gallen 2008-07, Department of Economics, University of St. Gallen.
  3. Spyros Arvanitis & Tobias Stucki, 2013. "The Impact of Venture Capital on the Persistence of Innovation Activities of Swiss Start-ups," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 13-332, KOF Swiss Economic Institute, ETH Zurich.
  4. Matthew Beacham & Bipasa Datta, 2013. "Who Becomes the Winner? Effects of Venture Capital on Firms’ Innovative Incentives - A Theoretical Investigation," Discussion Papers, Department of Economics, University of York 13/33, Department of Economics, University of York.

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