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Firm Level Implications of Early Stage Venture Capital Investment : An Empirical Investigation

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Author Info
Keilbach, Max
Engel, Dirk

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Abstract

The paper analyses the impact of venture capital finance on growth and innovation activities of young German firms. Among other variables, our panel of firm data includes data on venture capital funding and patent applications. With a statistical matching procedure we draw an adequate control group of non venture funded firms. The analysis gives evidence that innovative firms will be able to close a venture capital deal with higher probability. Once the firms are venture funded, they display higher growth rates but do not differ in their innovative output from otherwise comparable firms. We derive strategic implications. --

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-82.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:1336

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Related research
Keywords: Firm Demography; Firm Start-Ups; Firm Growth; Venture Capital; Patented Inventions; Microeconometric Evaluation Methods;

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Find related papers by JEL classification:
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods

References listed on IDEAS
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  1. Laura Bottazzi & Marco Da Rin, 2002. "Venture capital in Europe and the financing of innovative companies," Economic Policy, CEPR, CES, MSH, vol. 17(34), pages 229-270, 04. [Downloadable!] (restricted)
  2. Lanjouw, Jean O & Pakes, Ariel & Putnam, Jonathan, 1998. "How to Count Patents and Value Intellectual Property: The Uses of Patent Renewal and Application Data," Journal of Industrial Economics, Blackwell Publishing, vol. 46(4), pages 405-32, December. [Downloadable!] (restricted)
  3. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August. [Downloadable!] (restricted)
    Other versions:
  4. Bürgel, Oliver & Fier, Andreas & Licht, Georg & Murray, Gordon, 2000. "Internationalisation of high-tech start-ups and fast growth-evidence for UK and Germany," ZEW Discussion Papers 00-35, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, 02. [Downloadable!] (restricted)
    Other versions:
  6. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January. [Downloadable!] (restricted)
  7. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 261-94, April. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. 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.
  10. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 13(4), pages 959-84.
  12. Max Keilbach, 2005. "Quantitative, Non-Experimental Approaches to the Microeconomic Evaluation of Public Policy Measures - A Survey," Papers on Entrepreneurship, Growth and Public Policy 2005-30, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
  13. Harhoff, Dietmar & Scherer, Frederic M. & Vopel, Katrin, 2003. "Citations, family size, opposition and the value of patent rights," Research Policy, Elsevier, vol. 32(8), pages 1343-1363, September. [Downloadable!] (restricted)
  14. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Astrid Romain & Bruno Van Pottelsberghe, 2004. "The economic impact of venture capital," Working Papers CEB 04-014.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
  3. Rainer Fehn & Thomas Fuchs, 2003. "Capital Market Institutions and Venture Capital: Do They Affect Unemployment and Labour Demand?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Dorothea Schäfer & Axel Werwatz & Volker Zimmermann, 2003. "The Determinants of Debt and (Private-) Equity Financing in Young Innovative SMEs: Evidence from Germany," CFS Working Paper Series 2004/06, Center for Financial Studies. [Downloadable!]
    Other versions:
  5. Hirukawa, Masayuki & Ueda, Masako, 2008. "Venture Capital and Industrial ''Innovation''," CEPR Discussion Papers 7089, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Okamuro, Hiroyuki & Zhang, Jian Xiong, 2006. "Ownership Structure and R&D Investment of Japanese Start-up Firms," CEI Working Paper Series 2006-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  7. Mohnen, Pierre & Palm, Franz & Schim van der Loeff, Sybrand & Tiwari, Amaresh, 2008. "Financial Constraints and Other Obstacles: Are they a Threat to Innovation Activity?," UNU-MERIT Working Paper Series 006, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology. [Downloadable!]
    Other versions:
  8. Christian Schröder, 2009. "Financial System and Innovations-Determinants of Early Stage Venture Capital in Europe," Schumpeter Discussion Papers sdp09004, Universitätsbibliothek Wuppertal, University Library. [Downloadable!]
  9. Dirk Engel & Claire Champenois & Oliver Heneric, 2004. "The Birth of German Biotechnology Industry – Did Venture Capital run the show?," RWI Discussion Papers 0016, Rheinisch-Westfälisches Institut für Wirtschaftsforschung. [Downloadable!]
  10. Alexander Popov & Peter Roosenboom, 2009. "Does Private Equity Investment Spur Innovation? Evidence from Europe," Working Paper Series 1063, European Central Bank. [Downloadable!]
  11. Audretsch, David B & Bönte, Werner & Mahagaonkar, Prashanth, 2009. "Financial Signalling by Innovative Nascent Entrepreneurs," CEPR Discussion Papers 7165, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Cécile Carpentier & Jean-François L'Her & Jean-Marc Suret, 2008. "Stock Exchange Markets for New Ventures," CIRANO Working Papers 2008s-12, CIRANO. [Downloadable!]
  13. Hirukawa, Masayuki & Ueda, Masako, 2008. "Venture Capital and Innovation: Which is First?," CEPR Discussion Papers 7090, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Fabrizi, Simona & Lippert, Steffen & Norback, Pehr-Johan & Persson, Lars, 2007. "Venture Capitalists, Asymmetric Information and Ownership in the Innovation Process," MPRA Paper 6265, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  15. Dirk Engel & Joel Stiebale, 2009. "Private Equity, Investment and Financial Constraints – Firm-Level Evidence for France and the United Kingdom," Ruhr Economic Papers 0126, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
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