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An Analysis Of The Impact Of Venture Capital Investment On Economic Growth And Innovation: Evidence From The Usa And Russia

Author

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  • Vladimir Vladimirovich Kolmakov
  • Aleksandra Grigorievna Polyakova
  • Vasily Sergeevich Shalaev

Abstract

We hear a lot of political declarations stating the importance of developing an innovation economy by fostering venture capital inflows. But it is obvious that the venture capital market makes an extremely low contribution in terms of total R&D spending or gross investment. Thus, theory says venture capital investment (VCI) is important due to its huge impact on modernization, but practitioners note that there is no evidence and VCI constitutes about 1% of total investments. Formal logic foregrounds the thesis that the effect of venture investment is important and significant, but delayed. We contribute to the theory and discussion of the problem of choosing between venture and non-venture funding by determining a specific niche for venture capital investment. We derive lagged regression models for GDP and patent applications for the US and Russia, to test VCI’s impact on economic growth and innovation. Comparison of model estimates shows significant VCI influence on GDP at a 4-6 year lag and no synchronous influence, valid for both the US and Russia. We prove the main hypothesis of our research: the effect of venture investment on economic and innovation development parameters is significant and much greater than that of ‘conventional’ investment.

Suggested Citation

  • Vladimir Vladimirovich Kolmakov & Aleksandra Grigorievna Polyakova & Vasily Sergeevich Shalaev, 2015. "An Analysis Of The Impact Of Venture Capital Investment On Economic Growth And Innovation: Evidence From The Usa And Russia," Economic Annals, Faculty of Economics, University of Belgrade, vol. 60(207), pages 7-38, September.
  • Handle: RePEc:beo:journl:v:60:y:2015:i:207:p:7-38
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    References listed on IDEAS

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    1. James Brander & Jean-Etienne De Bettignies, 2009. "Venture capital investment: the role of predator-prey dynamics with learning by doing," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(1), pages 1-19.
    2. 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.
    3. Rin, Marco Da & Hellmann, Thomas & Puri, Manju, 2013. "A Survey of Venture Capital Research," Handbook of the Economics of Finance,, Elsevier.
    4. Manju Puri & Rebecca Zarutskie, 2012. "On the Life Cycle Dynamics of Venture-Capital- and Non-Venture-Capital-Financed Firms," Journal of Finance, American Finance Association, vol. 67(6), pages 2247-2293, December.
    5. Josh Lerner & Joacim Tåg, 2013. "Institutions and venture capital," Industrial and Corporate Change, Oxford University Press, vol. 22(1), pages 153-182, February.
    6. Kleinknecht, Alfred, 1990. "Are There Schumpeterian Waves of Innovations?," Cambridge Journal of Economics, Oxford University Press, vol. 14(1), pages 81-92, March.
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    Cited by:

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    More about this item

    Keywords

    venture capital investment; economic growth; innovation; comparative studies; R&D spending;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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