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Technifying Ventures

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Abstract

How do advanced technology adoption and venture capital (VC) funding impact employment and growth? An analysis of data from the US Census Bureau suggests that while both advanced technology use and VC funding matter on their own for firm outcomes, their joint presence is most strongly correlated with higher employment levels. VC presence is linked with a high increase in employment, though primarily among a limited subset of firms. In contrast, technology adoption is associated with a smaller rise in employment, yet it influences a considerably larger number of firms. A model of startups is created, focusing on decisions to use advanced technology and seek VC funding. The model is compared with firm-level data on employment, advanced technology use, and VC investment. Several thought experiments are conducted using the model. Some experiments assess the importance of advanced technology and VC in the economy. Others examine the reallocation effects across firms with different technology choices and funding sources in response to shifts in taxes and subsidies.

Suggested Citation

  • Yoshiki Ando & Emin Dinlersoz & Jeremy Greenwood & Ruben Piazzesi, 2025. "Technifying Ventures," Economie d'Avant Garde Research Reports 40, Economie d'Avant Garde.
    • Handle: RePEc:eag:rereps:40
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    References listed on IDEAS

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    1. Emin Dinlersoz & Nathan Goldschlag & Mehmet Yorukoglu & Nikolas Zolas, 2023. "On The Role of Trademarks: From Micro Evidence to Macro Outcomes," Working Papers 23-16, Center for Economic Studies, U.S. Census Bureau.
    2. Williamson, Stephen D., 1986. "Costly monitoring, financial intermediation, and equilibrium credit rationing," Journal of Monetary Economics, Elsevier, vol. 18(2), pages 159-179, September.
    3. Kathryn Bonney & Cory Breaux & Cathy Buffington & Emin Dinlersoz & Lucia S. Foster & Nathan Goldschlag & John C. Haltiwanger & Zachary Kroff & Keith Savage, 2024. "Tracking Firm Use of AI in Real Time: A Snapshot from the Business Trends and Outlook Survey," NBER Working Papers 32319, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Advanced technology; banks; capital gains taxation; corporate income taxation; difference-in-difference analysis; employment; firm-level data; reallocation effect; startups; subsidies; synergy; venture capital; technology adoption; US Census data;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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