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The effects of venture capital on firm innovation: the role of absorptive capacity

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  • Abderrahim Laachach
  • Younes Ettahri

Abstract

The concept of absorptive capacity is currently receiving attention in the literature and the underlying drivers of innovation. The present article emphasises the contribution of venture capitalists to the innovation process, in particular through absorptive capacity. Building on the increasing importance of the structural equation modelling (SEM) as a substantial analytical tool for testing cause-effect-relationships models with latent variables, we used the partial least squares structural equation modelling (PLS-SEM) to test the structural and the measurement model of our research. The sample of this study consisted of 62 venture capital backed Moroccan firms. The results reveal that the innovation is largely associated upstream with the absorptive capacity in venture capital backed firms. However, the contribution of venture capitalists to innovation is relatively limited, particularly for radical innovation. Furthermore, the firm size has no significant impact on innovation and absorptive capacity.

Suggested Citation

  • Abderrahim Laachach & Younes Ettahri, 2023. "The effects of venture capital on firm innovation: the role of absorptive capacity," International Journal of Business Innovation and Research, Inderscience Enterprises Ltd, vol. 31(3), pages 407-432.
    • Handle: RePEc:ids:ijbire:v:31:y:2023:i:3:p:407-432
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