Liquidity, Technological Opportunities, and the Stage Distribution of Venture Capital Investments


  • Henry Lahr,

  • Andrea Mina

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    • Henry Lahr is a Research Fellow at the Centre for Business Research and UK∼IRC, Judge Business School, University of Cambridge in Cambridge, UK. Andrea Mina is a University Lecturer in Economics of Innovation in the Judge Business School, University of Cambridge in Cambridge, UK.

  • We thank Marc Lipson (Editor) and an anonymous referee for helpful comments and valuable suggestions. We are also grateful to our colleagues as well as the CBR associates and FINNOV researchers who commented on previous versions of the paper. All remaining errors are our own. We gratefully acknowledge funding from the European Community's Seventh Framework Programme (FP7/2007-2013) under Socio-economic Sciences and Humanities grant agreement no. 217466, and from the Department for Business Innovation and Skills (BIS), the Economic and Social Research Council (ESRC), the National Endowment for Science, Technology and the Arts (NESTA) and the Technology Strategy Board, through the UK Innovation Research Centre.

  • The copyright line in this article was changed on 11 December 2014 after online publication.


This paper explores the determinants of the stage distribution of European venture capital investments from 1990 to 2011. Consistent with liquidity risk theory, we find that the likelihood of investing in earlier stages increases relative to all private equity investments during liquidity crisis years. While liquidity is the main driver of acquisition investments and, to some extent, of expansion financings, technological opportunities are overall the main driver of early and late stage venture capital investments. In contrast to the dotcom crash, the recent financial crisis negatively affected the relative likelihood of expansion investments, but not of early and late stage investments.