This article is a revision of the paper presented at the 54th Panel Meeting of Economic Policy in Warsaw. We are grateful to three anonymous referees, our discussants Andrea Ichino and Fabiano Schivardi, Thorsten Beck, Patric Bolton, Nicola Fuchs-Shündeln, Nicola Gennaioli, Michael Haliassos, Francis Kramarz, and Per Stromberg, seminar participants at the ECB, and conference participants at the FMA-Europe 2009 meeting in Torino for valuable comments. We also thank Lieven Baert and Kim Bonnema for outstanding research assistance. The opinions expressed herein are those of the authors and do not necessarily reflect those of the ECB or the Eurosystem. The Managing Editor in charge of this paper was Jan van Ours.
Venture capital and patented innovation: evidence from Europe
Article first published online: 2 JUL 2012
© CEPR, CES, MSH, 2012
Volume 27, Issue 71, pages 447–482, July 2012
How to Cite
Popov, A. and Roosenboom, P. (2012), Venture capital and patented innovation: evidence from Europe. Economic Policy, 27: 447–482. doi: 10.1111/j.1468-0327.2012.00290.x
- Issue published online: 2 JUL 2012
- Article first published online: 2 JUL 2012
We provide the first cross-country evidence of the effect of venture capital investment on patented inventions. Using a panel of 21 European countries and 10 manufacturing industries covering the period 1991–2005, we study the effect of venture capital (VC), relative to R&D, on the number of granted patents. We address concerns about causality by exploiting variations across countries and over time in private equity fundraising and in the structure of private equity funds. We find that the effect of VC is significant only in the subsample of high-VC countries, where the ratio VC/R&D has averaged around 3.9% between 1991 and 2005 and VC has accounted for 10.2% of industrial innovation during that period. We also find that VC is relatively more successful in fostering innovation in countries with lower barriers to entrepreneurship, with a tax and regulatory environment that welcomes venture capital investment, and with lower taxes on capital gains.
— Alexander Popov and Peter Roosenboom