The Birth of German Biotechnology Industry – Did Venture Capital run the show?
AbstractWe answer the questions, how many firms acting in the modern German biotechnology industry are funded by venture capital companies (VCC) as well as equity funded by corporate investors. The theory suggests a high relevance of VCC as venturing partner of high-tech projects. In addition we argue that corporate investors are a venturing partner of firms with high-risk projects to a lower extent.Incumbents,however, are confronted with some opportunities in the low-risk area of the biotechnology industry to secure an optimal supply for the current product pipeline.Our empirical results emphasize a crucial importance of venture capital as financial resource for high-risk projects: whereas 42 percent of all healthcare developer in the early stage are venture-backed firms, only a small share of low-risk projects received venture capital. The results for corporate investors are reversible.Fewer high-tech projects and more low-risk projects compared to VCC are equity financed by corporate investors. The econometric analysis suggests that the observed pattern is mainly driven by the level of project risk and hence, supports all our hypotheses.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung in its series RWI Discussion Papers with number 0016.
Length: 26 pages
Date of creation: Jun 2004
Date of revision:
Other versions of this item:
- Heneric, Oliver & Engel, Dirk & Champenois, Claire, 2004. "The Birth of German Biotechnology Industry: Did Venture Capital run the Show?," ZEW Discussion Papers 04-09, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bygrave, William D., 1987. "Syndicated investments by venture capital firms: A networking perspective," Journal of Business Venturing, Elsevier, vol. 2(2), pages 139-154.
- Keilbach, Max & Engel, Dirk, 2002.
"Firm Level Implications of Early Stage Venture Capital Investment: An Empirical Investigation,"
ZEW Discussion Papers
02-82, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Engel, Dirk & Keilbach, Max, 2007. "Firm-level implications of early stage venture capital investment -- An empirical investigation," Journal of Empirical Finance, Elsevier, vol. 14(2), pages 150-167, March.
- Max Keilbach & Dirk Engel, . "Firm Level Implications of Early Stage Venture Capital Investment - An Empiri cal Investigation," Papers on Entrepreneurship, Growth and Public Policy 2005-22, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
- D. McFadden & J. Hausman, 1981.
"Specification Tests for the Multinominal Logit Model,"
292, Massachusetts Institute of Technology (MIT), Department of Economics.
- Hausman, Jerry & McFadden, Daniel, 1984. "Specification Tests for the Multinomial Logit Model," Econometrica, Econometric Society, vol. 52(5), pages 1219-40, September.
- 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.
- Lynne G. Zucker & Michael R. Darby & Jeff S. Armstrong, 2003.
"Commercializing knowledge: university science, knowledge capture and firm performance in biotechnology,"
Federal Reserve Bank of Dallas, issue Sep, pages 149-170.
- Lynne G. Zucker & Michael R. Darby & Jeff S. Armstrong, 2001. "Commercializing Knowledge: University Science, Knowledge Capture, and Firm Performance in Biotechnology," NBER Working Papers 8499, National Bureau of Economic Research, Inc.
- Paul Gompers & Josh Lerner, 2000.
"The Determinants of Corporate Venture Capital Success: Organizational Structure, Incentives, and Complementarities,"
in: Concentrated Corporate Ownership, pages 17-54
National Bureau of Economic Research, Inc.
- Paul A. Gompers & Josh Lerner, 1998. "The Determinants of Corporate Venture Capital Successes: Organizational Structure, Incentives, and Complementarities," NBER Working Papers 6725, National Bureau of Economic Research, Inc.
- James A. Brander & Raphael Amit & Werner Antweiler, 2002. "Venture-Capital Syndication: Improved Venture Selection vs. The Value-Added Hypothesis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 423-452, 09.
- Pinar Karaca-Mandic & Kenneth Train, 2003. "Standard error correction in two-stage estimation with nested�samples," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 401-407, December.
- Zucker, Lynne G & Darby, Michael R & Brewer, Marilynn B, 1998. "Intellectual Human Capital and the Birth of U.S. Biotechnology Enterprises," American Economic Review, American Economic Association, vol. 88(1), pages 290-306, March.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Paul A. Gompers & Josh Lerner, 1999. "What Drives Venture Capital Fundraising?," NBER Working Papers 6906, National Bureau of Economic Research, Inc.
- Sean Nicholson, 2005.
"Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality,"
The Journal of Business,
University of Chicago Press, vol. 78(4), pages 1433-1464, July.
- Sean Nicholson & Patricia M. Danzon & Jeffrey S. McCullough, 2002. "Biotech-Pharmaceutical Alliances as a Signal of Asset and Firm Quality," NBER Working Papers 9007, National Bureau of Economic Research, Inc.
- Florida, Richard L. & Kenney, Martin, 1988. "Venture capital-financed innovation and technological change in the USA," Research Policy, Elsevier, vol. 17(3), pages 119-137, June.
- Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
- Christopher B. Barry, 1994. "New Directions in Research on Venture Capital Finance," Financial Management, Financial Management Association, vol. 23(3), Fall.
- Engel, Dirk & Fryges, Helmut, 2002. "Aufbereitung und Angebot der ZEW Gründungsindikatoren," ZEW Dokumentationen 02-01, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Almus, Matthias & Engel, Dirk & Prantl, Susanne, 2000. "The Mannheim Foundation Panels of the Centre for European Economic Research (ZEW)," ZEW Dokumentationen 00-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Chan, Yuk-Shee, 1983.
" On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information,"
Journal of Finance,
American Finance Association, vol. 38(5), pages 1543-68, December.
- Yuk-Shee Chan., 1982. "On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information," Research Program in Finance Working Papers 127, University of California at Berkeley.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Lockett, Andy & Wright, Mike, 2001. "The syndication of venture capital investments," Omega, Elsevier, vol. 29(5), pages 375-390, October.
- Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
- Steven Casper & Hannah Kettler, 2001. "National Institutional Frameworks And The Hybridization Of Entrepreneurial Business Models: The German And Uk Biotechnology Sectors," Industry and Innovation, Taylor & Francis Journals, vol. 8(1), pages 5-30.
- Gambardella, Alfonso & Orsenigo, Luigi & Pammolli, Fabio, 2000. "Global Competitiveness in Pharmaceuticals: A European Perspective," MPRA Paper 15965, University Library of Munich, Germany.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- von Burg, Urs & Kenney, Martin, 2000. "Venture capital and the birth of the local area networking industry," Research Policy, Elsevier, vol. 29(9), pages 1135-1155, December.
- Paul A. Gompers, 2002. "Corporations and the financing of innovation: The corporate venturing experience," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 1-17.
- Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages F54-F72, February.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Rammer, Christian & Ohmstedt, Jörg & Binz, Hanna L. & Heneric, Oliver, 2006. "Unternehmensgründungen in der Biotechnologie in Deutschland 1991 bis 2004," ZEW Dokumentationen 06-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Weiler).
If references are entirely missing, you can add them using this form.