IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The determinants of venture capital: a panel data analysis of 16 OECD countries

  • Astrid Romain
  • Bruno Van Pottelsberghe

The objective of this paper is to identify the main determinants of venture capital (VC). We develop a theoretical model where three main types of factors affect the demand and supply of VC. These factors are related to macroeconomic conditions, research efforts and technological opportunity, and the entrepreneurial environment. The model is evaluated econometrically with a panel dataset of 16 major OECD countries over the period 1990-1998. The estimates confirm that VC intensity is highly pro-cyclical - it reacts positively and significantly to GDP growth. Short-term (one-year) interest rates have a positive impact on VC intensity, which means that they affect more the demand side of VC (entrepreneurs) than the supply side. Indicators of technological opportunity, such as the growth rate of R&D investment, the stock of knowledge and the number of triadic patents affect positively and significantly the relative level of VC. The factors associated with the entrepreneurial environment also explain a substantial part of cross-country variations in VC intensity. An increase in corporate income tax rate has a negative effect on VC intensity. Labour market rigidities reduce the impact of the GDP growth rate and of the stock of knowledge, whereas a minimum level of entrepreneurship is required in order to have a positive effect of the available stock of knowledge on VC intensity. One important policy implication emerges from these results. It is not by providing money for VC that public decision makers will stimulate VC, but by providing knowledge and improving the entrepreneurial environment.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://dipot.ulb.ac.be/dspace/bitstream/2013/8633/1/aro-0012.pdf
File Function: aro-0012
Download Restriction: no

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 04-015.RS.

as
in new window

Length:
Date of creation: 2004
Date of revision:
Publication status: Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB)
Handle: RePEc:sol:wpaper:04-015
Contact details of provider: Postal: CP114/03, 42 avenue F.D. Roosevelt, 1050 Bruxelles
Phone: +32 (0)2 650.48.64
Fax: +32 (0)2 650.41.88
Web page: http://difusion.ulb.ac.be
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Manigart, Sophie & De Waele, Koen & Wright, Mike & Robbie, Ken & Desbrieres, Philippe & Sapienza, Harry J. & Beekman, Amy, 2002. "Determinants of required return in venture capital investments: a five-country study," Journal of Business Venturing, Elsevier, vol. 17(4), pages 291-312, July.
  2. Allen N. Berger & Gregory F. Udell, 1998. "The economics of small business finance: the roles of private equity and debt markets in the financial growth cycle," Finance and Economics Discussion Series 1998-15, Board of Governors of the Federal Reserve System (U.S.).
  3. Hellmann, Thomas F. & Puri, Manju, 2000. "Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence," Research Papers 1661, Stanford University, Graduate School of Business.
  4. Dominique Guellec & Bruno van Pottelsberghe de la Potterie, 2001. "R&D and Productivity Growth: Panel Data Analysis of 16 OECD Countries," OECD Science, Technology and Industry Working Papers 2001/3, OECD Publishing.
  5. Engel, Dirk, 2002. "The Impact of Venture Capital on Firm Growth: An Empirical Investigation," ZEW Discussion Papers 02-02, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. James M. Poterba, 1988. "Venture Capital and Capital Gains Taxation," Working papers 508, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "The Economic Impact of Venture Capital," IIR Working Paper 03-20, Institute of Innovation Research, Hitotsubashi University.
  8. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-84.
  9. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
  10. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
  11. José Martí Pellón & Marina Balboa, 2001. "Determinants Of Private Equity Fundraising In Western Europe," Working Papers. Serie AD 2001-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  12. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
  13. van Pottelsberghe Bruno & Guellec Dominique, . "From R & D to Productivity Growth: the Sources of Knowledge - Spillovers and their Interaction," EcoMod2002 330800067, EcoMod.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sol:wpaper:04-015. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.