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Venture capital and innovation at the firm level

Author

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  • Pere Arqué Castells

    (Universitat de Barcelona & IEB)

Abstract

This paper studies the relationship between venture capital (VC) and innovation using a self-collected dataset containing 119 innovative, VC-funded firms and 164,486 controls that operate in Spain. Probit model estimates indicate that firms that have applied for at least one patent are significantly more likely to obtain VC investments. However, when implementing a matching approach to correct for selectivity, no evidence is found of a significant impact of VC on firms’ patenting activity. Rather, evidence is found of a positive effect of VC on the sales growth of funded firms. These results suggest that, rather than having an impact on innovation activities, venture capitalists (VCs) focus on the commercialization of existing products. A finer breakdown by ownership and investment stage also provides evidence that private VCs and early stage investments are notably more effective at stimulating sales than public VCs and late stage investments respectively.

Suggested Citation

  • Pere Arqué Castells, 2010. "Venture capital and innovation at the firm level," Working Papers 2010/12, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2010-12
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    References listed on IDEAS

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    More about this item

    Keywords

    Venture capital; innovation; patents; matching estimator;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • 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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