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Fencing off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers

Author

Listed:
  • Ufuk Akcigit
  • Sina T. Ates
  • Josh Lerner
  • Richard R. Townsend
  • Yulia Zhestkova

Abstract

The treatment of foreign investors is a contentious topic in U.S. entrepreneurship policy. We model a setting where foreign corporate investments in Silicon Valley may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to knowledge spillovers. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S. government to raise their costs to deter these investments. Using as comprehensive as possible a sample of investments by foreign corporate investors in U.S. startups, we find evidence consistent with the presence of knowledge spillovers to foreign investors.

Suggested Citation

  • Ufuk Akcigit & Sina T. Ates & Josh Lerner & Richard R. Townsend & Yulia Zhestkova, 2020. "Fencing off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers," NBER Working Papers 27828, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27828
    Note: CF EFG PR
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    Citations

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    Cited by:

    1. Fiona Paine & Richard R. Townsend & Ting Xu, 2025. "Should Governments Restrict Foreign Investments in Startups?," NBER Chapters, in: Entrepreneurship and Innovation Policy and the Economy, volume 5, National Bureau of Economic Research, Inc.
    2. Litov, Lubomir P. & Liu, Xia & Megginson, William L. & Sitorus, Romora E., 2024. "Venture capitalist directors and managerial incentives," Journal of Corporate Finance, Elsevier, vol. 89(C).
    3. Hellmann, Thomas & Montag, Alexander & Tåg, Joacim, 2024. "Tolerating Losses for Growth: J-Curves in Venture Capital Investing," Working Paper Series 1500, Research Institute of Industrial Economics.
    4. Yu Cao & Francesca de Nicola & Aaditya Mattoo & Jonathan David Timmis, 2024. "Technological Decoupling ? The Impact on Innovation of US Restrictions on Chinese Firms," Policy Research Working Paper Series 10950, The World Bank.
    5. Weik, Stefan & Achleitner, Ann-Kristin & Braun, Reiner, 2024. "Venture capital and the international relocation of startups," Research Policy, Elsevier, vol. 53(7).
    6. Harilal Krishna & Yash Kashyap & Dwarkeshwar Dutt & Ambuj D. Sagar & Abhishek Malhotra, 2023. "Understanding India’s low-carbon energy technology startup landscape," Nature Energy, Nature, vol. 8(1), pages 94-105, January.
    7. Sabrina T. Howell & Josh Lerner & Ramana Nanda & Richard R. Townsend, 2020. "How Resilient is Venture-Backed Innovation? Evidence from Four Decades of U.S. Patenting," NBER Working Papers 27150, National Bureau of Economic Research, Inc.
    8. Xiaoli Wang & Yi Tan, 2025. "Research on the Reverse Technology Spillover Effect from China’s CVC Overseas Investments," IJFS, MDPI, vol. 13(2), pages 1-22, April.

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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