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The Economic Impact of Venture Capital

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  • van Pottelsberghe de la Potterie, Bruno
  • Romain, Astrid

Abstract

This paper attempts to evaluate the macroeconomic impact of venture capital (VC). We test the assumption that VC is similar in several respects to business R&D performed by large firms and therefore contributes to economic growth through two main channels: innovation and absorptive capacity. The quantitative results, based on a panel of 16 OECD countries from 1990 to 2001, show that the social return of VC is significantly higher than the social return of business or public R&D. An increased VC intensity also makes it easier to absorb the knowledge generated by universities and firms.

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  • van Pottelsberghe de la Potterie, Bruno & Romain, Astrid, 2004. "The Economic Impact of Venture Capital," Discussion Paper Series 1: Economic Studies 2004,18, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:2163
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    References listed on IDEAS

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    12. Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "The Determinants of Venture Capital: A Panel Data Analysis of 16 OECD Countries," IIR Working Paper 03-25, Institute of Innovation Research, Hitotsubashi University.
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    Cited by:

    1. Đalić, Irena & Terzić, Svetlana, 2016. "Analysis of Performance of Venture Capital Funds in Transition Countries: An Empirical Study in Bosnia and Herzegovina," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2016), Rovinj, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Rovinj, Croatia, 8-9 September 2016, pages 53-60, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    2. Orman, Cuneyt, 2015. "Organization of innovation and capital markets," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 94-114.
    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.
    4. Ueda, Masako & Hirukawa, Masayuki, 2008. "Venture Capital and Industrial ''Innovation''," CEPR Discussion Papers 7089, C.E.P.R. Discussion Papers.
    5. Meng‐Chi Tang & Yih‐Luan Chyi, 2008. "Legal Environments, Venture Capital, And Total Factor Productivity Growth Of Taiwanese Industry," Contemporary Economic Policy, Western Economic Association International, vol. 26(3), pages 468-481, July.
    6. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers sdp09004, Universitätsbibliothek Wuppertal, University Library.
    7. Kshitija Joshi & Deepak Chandrashekar & Krishna Satyanarayana & Apoorva Srinivas, 2022. "VC Funded Start-Ups in India: Innovation, Social Impact, and the Way Forward," International Journal of Global Business and Competitiveness, Springer, vol. 17(1), pages 104-113, June.
    8. Francesca D'Auria & Andrea Pagano & Marco Ratto & Janos Varga, 2009. "A comparison of structural reform scenarios across the EU member states - Simulation-based analysis using the QUEST model with endogenous growth," European Economy - Economic Papers 2008 - 2015 392, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Jaaskelainen, Mikko & Maula, Markku & Murray, Gordon, 2007. "Profit distribution and compensation structures in publicly and privately funded hybrid venture capital funds," Research Policy, Elsevier, vol. 36(7), pages 913-929, September.
    10. Samila, Sampsa & Sorenson, Olav, 2010. "Venture capital as a catalyst to commercialization," Research Policy, Elsevier, vol. 39(10), pages 1348-1360, December.
    11. Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "The Determinants of Venture Capital: A Panel Data Analysis of 16 OECD Countries," IIR Working Paper 03-25, Institute of Innovation Research, Hitotsubashi University.
    12. Elsayed Elsiefy, 2014. "Fundamental Requirements for Building an Islamic Venture Capital Model," Accounting and Finance Research, Sciedu Press, vol. 3(1), pages 1-55, February.
    13. Werner Roeger & Janos Varga & Jan in 't Veld, 2008. "Structural Reforms in the EU: A simulation-based analysis using the QUEST model with endogenous growth," European Economy - Economic Papers 2008 - 2015 351, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    14. Iman Seoudi, 2015. "Public Policy For Venture Capital: An Integrated Framework," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(4), pages 31-51.
    15. Michael Peneder, 2009. "The impact of venture capital on innovation behaviour and firm growth," Venture Capital, Taylor & Francis Journals, vol. 12(2), pages 83-107, November.
    16. Cuneyt Orman, 2010. "Organization of Innovation and Capital Markets (Teknolojik Yeniligin Orgutlenmesi ve Sermaye Piyasalari)," Working Papers 1010, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    17. Wen, Jun & Yang, Di & Feng, Gen-Fu & Dong, Minyi & Chang, Chun-Ping, 2018. "Venture capital and innovation in China: The non-linear evidence," Structural Change and Economic Dynamics, Elsevier, vol. 46(C), pages 148-162.
    18. Anna Gervasoni & Cristina De Silva & Michele Lertora & Andrea Odille Bosio, 2022. "Venture Capital for the development of smart cities: the Italian case," LIUC Papers in Economics 2022-13, Cattaneo University (LIUC).
    19. Jürgen Janger & Johann Scharler & Alfred Stiglbauer, 2006. "The Potential Growth Prospects of the Austrian Economy — Methods and Determinants," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 24-52.
    20. 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.
    21. Barbara Pistoresi & Valeria Venturelli, 2015. "Credit, venture capital and regional economic growth," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 742-761, October.
    22. Mark V. Cannice & Jonathan P. Allen & Manuel Tarrazo, 2016. "What do venture capitalists think of venture capital research?," Venture Capital, Taylor & Francis Journals, vol. 18(1), pages 1-20, January.
    23. Jun Wen & Xiu-Yun Yang & Gen-Fu Feng & Bo Sui & Chun-Ping Chang, 2017. "The comovement between venture capital and innovation in China: what are the implications?," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(6), pages 2489-2506, November.

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    More about this item

    Keywords

    Venture Capital; Productivity Growth; Innovation; Absorptive Capacity;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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