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Venture Capital and Knowledge Transfer

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  • Dessi, Roberta
  • Yin, Nina

Abstract

This paper explores a new role for venture capitalists, as knowledge intermediaries. A venture capital investor can communicate valuable knowledge to an entrepreneur, facilitating innovation. The venture capitalist can also communicate the entrepreneur's innovative knowledge to other portfolio companies. We study the costs and benefits of these two forms of knowledge transfer, and their implications for investment, innovation, and product market competition. The model also sheds light on the choice between venture capital and other forms of finance, and the determinants of the decision to seek patent protection for innovations. Our analysis provides a rationale for the use of contingencies (specifically, patent approval) in VC contracts documented by Kaplan and Stromberg (2003), and for recent evidence on patterns of syndication among venture capitalists.

Suggested Citation

  • Dessi, Roberta & Yin, Nina, 2015. "Venture Capital and Knowledge Transfer," TSE Working Papers 15-555, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:29010
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    References listed on IDEAS

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    Cited by:

    1. Chuanrong Wu & Xiaoming Yang & Veronika Lee & Mark E. McMurtrey, 2019. "Influence of Venture Capital and Knowledge Transfer on Innovation Performance in the Big Data Environment," JRFM, MDPI, vol. 12(4), pages 1-13, December.

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    More about this item

    Keywords

    venture capital; knowledge intermediaries; contracts; innovation; competition; patents;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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