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The Determinants of Venture Capital: Additional Evidence

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

Abstract

This paper attempts to identify and evaluate the main determinants of venture capital (VC). We develop a theoretical model where macroeconomic conditions, technological opportunity, and the entrepreneurial environment affect the demand and supply of VC. The quantitative results, based on a panel dataset of 16 OECD countries from 1990 to 2000, show that VC intensity is pro-cyclical. Interest rates affect more the demand side of VC (entrepreneurs) than the supply side. Indicators of technological opportunity, such as the stock of knowledge and the number of triadic patents affect positively and significantly the relative level of VC. Labour market rigidities reduce the impact of the GDP growth rate and of the stock of knowledge, whereas a minimum level of entrepreneurship is required in order to have a positive effect of the available stock of knowledge on VC intensity. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2004,19.

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Date of creation: 2004
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Handle: RePEc:zbw:bubdp1:2164

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Related research

Keywords: Venture Capital; Technological Opportuniy; Entrepreneurship; Labour Market Regidities;

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References

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  1. Hellmann, Thomas F. & Puri, Manju, 2000. "Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence," Research Papers, Stanford University, Graduate School of Business 1661, Stanford University, Graduate School of Business.
  2. Engel, Dirk, 2002. "The Impact of Venture Capital on Firm Growth: An Empirical Investigation," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 02-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(2), pages 145-168, Spring.
  4. Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "The Economic Impact of Venture Capital," IIR Working Paper, Institute of Innovation Research, Hitotsubashi University 03-20, Institute of Innovation Research, Hitotsubashi University.
  5. 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.
  6. José Martí Pellón & Marina Balboa, 2001. "Determinants Of Private Equity Fundraising In Western Europe," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2001-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. James M. Poterba, 1989. "Venture Capital and Capital Gains Taxation," NBER Working Papers 2832, National Bureau of Economic Research, Inc.
  8. Allen N. Berger & Gregory F. Udell, 1998. "The economics of small business finance: the roles of private equity and debt markets in the financial growth cycle," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-15, Board of Governors of the Federal Reserve System (U.S.).
  9. Schertler, Andrea, 2003. "Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis," EIFC - Technology and Finance Working Papers, United Nations University, Institute for New Technologies 27, United Nations University, Institute for New Technologies.
  10. Philippe Desbrières & Sophie Manigart & Koen De Waele & Mike Wright & Ken Robbie & Harry Sapienza & Amy Beekman, 2002. "Determinants of required return in venture capital investments:A five country study," Working Papers CREGO, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations 1020701, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
  11. 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.
  12. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-84.
  13. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
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Citations

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Cited by:
  1. 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.
  2. Schertler, Andrea & Tykvová, Tereza, 2012. "What lures cross-border venture capital inflows?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(6), pages 1777-1799.
  3. Márcia Siqueira Rapini, 2009. "Sistemas financeiros e o financiamento à inovação: algumas reflexões para o Brasil," Textos para Discussão Cedeplar-UFMG td367, Cedeplar, Universidade Federal de Minas Gerais.
  4. Ant Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," NBER Working Papers 15627, National Bureau of Economic Research, Inc.
  5. Tykvová, Tereza & Schertler, Andrea, 2011. "Cross-border venture capital flows and local ties: Evidence from developed countries," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 51(1), pages 36-48, February.
  6. repec:diw:diwfin:diwfin03050 is not listed on IDEAS
  7. 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.
  8. 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.
  9. Schertler, Andrea & Tykvová, Tereza, 2009. "Venture capital and internationalization," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 09-055, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Research Discussion Papers, Bank of Finland 30/2013, Bank of Finland.
  11. Samila, Sampsa & Sorenson, Olav, 2010. "Venture capital as a catalyst to commercialization," Research Policy, Elsevier, Elsevier, vol. 39(10), pages 1348-1360, December.
  12. Hirukawa, Masayuki & Ueda, Masako, 2008. "Venture Capital and Innovation: Which is First?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7090, C.E.P.R. Discussion Papers.
  13. Andrea Schertler, 2007. "Knowledge Capital and Venture Capital Investments: New Evidence from European Panel Data," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 8, pages 64-88, 01.

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