IDEAS home Printed from https://ideas.repec.org/a/eee/jbfina/v37y2013i12p4695-4710.html
   My bibliography  Save this article

Venture capital and new business creation

Author

Listed:
  • Popov, Alexander
  • Roosenboom, Peter

Abstract

Using a comprehensive database of firms from 21 European countries over the period 1998–2008, we find that venture capital investment has a positive effect on the rate of new business creation. This is especially true in countries with higher entry costs, higher protection of intellectual property rights, and lower taxes on capital gains. Our results suggest that, controlling for country and industry characteristics, venture capital is beneficial to bringing new ideas to the marketplace in the shape of new companies.

Suggested Citation

  • Popov, Alexander & Roosenboom, Peter, 2013. "Venture capital and new business creation," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4695-4710.
  • Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:4695-4710
    DOI: 10.1016/j.jbankfin.2013.08.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378426613003415
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Philippe Aghion & Thibault Fally & Stefano Scarpetta, 2007. "Credit constraints as a barrier to the entry and post-entry growth of firms," Economic Policy, CEPR;CES;MSH, vol. 22, pages 731-779, October.
    3. Christian Keuschnigg, 2004. "Venture Capital Backed Growth," Journal of Economic Growth, Springer, vol. 9(2), pages 239-261, June.
    4. Thorsten Beck & Asli Demirguc-Kunt & Luc Laeven & Ross Levine, 2008. "Finance, Firm Size, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1379-1405, October.
    5. Shai Bernstein & Josh Lerner & Morten Sørensen & Per Strömberg, 2010. "Private Equity and Industry Performance," NBER Working Papers 15632, National Bureau of Economic Research, Inc.
    6. Andy Cosh & Douglas Cumming & Alan Hughes, 2009. "Outside Enterpreneurial Capital," Economic Journal, Royal Economic Society, vol. 119(540), pages 1494-1533, October.
    7. Da Rin, Marco & Nicodano, Giovanna & Sembenelli, Alessandro, 2006. "Public policy and the creation of active venture capital markets," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1699-1723, September.
    8. Hirukawa, Masayuki & Ueda, Masako, 2008. "Venture Capital and Industrial ''Innovation''," CEPR Discussion Papers 7089, C.E.P.R. Discussion Papers.
    9. Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
    10. Nicola Cetorelli & Philip E. Strahan, 2006. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," Journal of Finance, American Finance Association, vol. 61(1), pages 437-461, February.
    11. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    12. Giot, Pierre & Schwienbacher, Armin, 2007. "IPOs, trade sales and liquidations: Modelling venture capital exits using survival analysis," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 679-702, March.
    13. Ahlin, Christian & Pang, Jiaren, 2008. "Are financial development and corruption control substitutes in promoting growth?," Journal of Development Economics, Elsevier, vol. 86(2), pages 414-433, June.
    14. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    15. Thomas Hellmann, 1998. "The Allocation of Control Rights in Venture Capital Contracts," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 57-76, Spring.
    16. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
    17. Sevilir, Merih, 2010. "Human capital investment, new firm creation and venture capital," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 483-508, October.
    18. 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, February.
    19. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    20. 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.
    21. Steven N. Kaplan & Per Stromberg, 2001. "Venture Capitalists As Principals: Contracting, Screening, and Monitoring," NBER Working Papers 8202, National Bureau of Economic Research, Inc.
    22. 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, April.
    23. 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.
    24. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    25. Rudy Aernoudt, 1999. "European policy towards venture capital: Myth or reality?," Venture Capital, Taylor & Francis Journals, vol. 1(1), pages 47-58, January.
    26. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
    27. Cumming, Douglas & Fleming, Grant & Suchard, Jo-Ann, 2005. "Venture capitalist value-added activities, fundraising and drawdowns," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 295-331, February.
    28. Armin Schwienbacher, 2008. "Innovation and Venture Capital Exits," Economic Journal, Royal Economic Society, vol. 118(533), pages 1888-1916, November.
    29. Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages 54-72, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ionel Bostan & Flavian Clipa & Raluca Irina Clipa, 2016. "Informal Institutions And Economic Performance," Knowledge Horizons - Economics, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 8(2), pages 53-58, June.
    2. Valerie Revest & Alessandro Sapio, 2016. "The creation function of a junior listing venue: An empirical test on the Alternative Investment Market," LEM Papers Series 2016/32, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. repec:spr:anresc:v:59:y:2017:i:1:d:10.1007_s00168-017-0814-9 is not listed on IDEAS
    4. Popov, Alexander, 2017. "Evidence on finance and economic growth," Working Paper Series 2115, European Central Bank.
    5. repec:spr:intemj:v:14:y:2018:i:1:d:10.1007_s11365-017-0463-6 is not listed on IDEAS
    6. Keasey, Kevin & Martinez, Beatriz & Pindado, Julio, 2015. "Young family firms: Financing decisions and the willingness to dilute control," Journal of Corporate Finance, Elsevier, vol. 34(C), pages 47-63.

    More about this item

    Keywords

    Venture capital; New business creation; Finance abd Growth;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:4695-4710. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/jbf .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.