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Determinants And Legitimacy Of Venture Capital Financing: An Empirical Verification


  • Karim Chaabouni

    () (University of Sfax)


The venture capital activity represents a financing intermediation suitable to the start-up and innovative SMEsÕ needs, and tries to confirm itself in the economic context. Indeed, such financing mode supports the companiesÕ creativity and development, particularly for the under capitalized SMEs whose access to the traditional sources of financing (bank financing and common stock financing) remain always difficult. In this field, this work tries to further explore both the key factors stimulating the venture capital activity, and the contribution of such financing mode to wealth creation and to economic growth. An empirical approach using panel data estimation is inducted here and makes up the contribution of this work. The estimation is relative to two linear regressions which constitute the retained model and tries to test both the effects of key factors on venture capital activity, and the effects of venture capital financings on economic growth. The considered data covers twelve developed countries (USA and eleven European countries), and all OLS, fixed effects and random effects estimates are applied. With respect to test results; however, only the appropriate estimates are taken into consideration. The main results show that venture capital depends positively on the R&D activity, and that such financing mode has a positive effect on economic growth. These results are also discussed to make meaningful comparisons with those of previous studies. Based on the conclusions, it may be recommended to consolidate the positive link ÒR&D Ð venture capital Ð economic growthÓ by the appropriate policies.

Suggested Citation

  • Karim Chaabouni, 2011. "Determinants And Legitimacy Of Venture Capital Financing: An Empirical Verification," Anadolu University Journal of Social Sciences, Anadolu University, vol. 11(1), pages 27-38, January.
  • Handle: RePEc:and:journl:v:11:y:2011:i:1:p:27-38

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    References listed on IDEAS

    1. Masako Ueda, 2004. "Banks versus Venture Capital: Project Evaluation, Screening, and Expropriation," Journal of Finance, American Finance Association, vol. 59(2), pages 601-621, April.
    2. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
    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. Schertler, Andrea, 2003. "Driving Forces of Venture Capital Investments in Europe: A Dynamic Panel Data Analysis," Kiel Working Papers 1172, Kiel Institute for the World Economy (IfW).
    5. Andrea Schertler, 2007. "Knowledge Capital and Venture Capital Investments: New Evidence from European Panel Data," German Economic Review, Verein für Socialpolitik, vol. 8, pages 64-88, January.
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    More about this item


    venture capital; R&D; stock exchange capitalization; innovation; growth; start-up;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D


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