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Cross-regional venture capital flows in Europe: The role of entrepreneurial ecosystems and proximity

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This paper examines whether, and under which conditions, regional entrepreneurial ecosystems mitigate spatial frictions in cross-regional venture capital (VC) investments. Using a dyadic panel of VC flows across 267 European NUTS-2 regions over 2008-2022, we estimate gravity-style regressions with high-dimensional fixed effects, distinguishing investments by stage and investor origin. Our results show that spatial frictions, particularly geographic and economic distance, remain important determinants of VC allocation. At the same time, regions with stronger entrepreneurial ecosystems attract higher VC inflows and exhibit lower sensitivity to institutional and structural differences. Differences across investor origins suggest that ecosystem legibility is most valuable when institutional uncertainty is high, such as for cross-border investors.

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  • Compano Ramon & Johanyak Csaba & Testa Giuseppina & Zhen Ni & Testa Giuseppina & Tuebke Alexander, 2026. "Cross-regional venture capital flows in Europe: The role of entrepreneurial ecosystems and proximity," JRC Working Papers on Corporate R&D and Innovation 2026-01, Joint Research Centre.
    • Handle: RePEc:ipt:wpaper:202601
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC146136
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