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Journal ArticleDOI

Venture Capital and Innovation: Evidence from European Economic Area Countries

09 Nov 2017-International Journal of Innovation and Technology Management (World Scientific Publishing Company)-Vol. 14, Iss: 06, pp 1750031
TL;DR: In this paper, the authors examined the long-run relationship between venture capital and innovation in 19 European Economic Area (EEA) countries over the period 1989-2014 and found the presence of both bidirectional and unidirectional causality between VC and innovation.
Abstract: The paper examines the long-run relationship between venture capital and innovation in the 19 European Economic Area (EEA) countries over the period 1989–2014. We use three different indicators of venture capital (VC), such as VC at early stage investment, VC at later stage investment, and VC total investment, and seven different indicators of innovation, such as patents-residents, patents-nonresidents, patents-total, research and development expenditure, researchers in research and development activities, high-technology exports, and scientific and technical journal articles, to examine this long-run relationship. Using cointegration technique, the study warrants the support of long-run relationship between venture capital and innovation in few cases, typically with reference to a particular VC indicator and innovation indicator. Expending the Granger causality test, the study finds the presence of both bidirectional and unidirectional causality between venture capital and innovation. However, these results vary from country-to-country within the EEA countries, depending upon the types of VC indicator and innovation indicator that we use in a particular empirical exploration process. The policy implication of this study is that the economic policies should recognize the differences in the venture capital and innovation in order to maintain the sustainable development in these EEA countries.
Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors used a panel vector error-correction model to study the Granger causality among VC investment, innovation, per capita economic growth, and financial development.

61 citations


Cites background or result from "Venture Capital and Innovation: Evi..."

  • ...of this hypothesis are Pradhan et al. (2016b). Interestingly, some studies offer mixed evidence. For instance, Pradhan et al. (2016a) support the validity of all four hypotheses....

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  • ...of this hypothesis are Pradhan et al. (2016b). Interestingly, some studies offer mixed evidence....

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  • ...Several studies show that the venture capital industry provides an alternate source of financing and other support services to enhance the innovative endeavours of firms (see, for example, Kortum and Lerner, 2000; Berger and Schaeck, 2011; Faria and Barbosa, 2014; Pradhan et al., 2017)....

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  • ...6Among the previous studies on the venture capital-growth nexus, Pradhan et al. (2016a) is the only study where all four hypotheses (SLH, DFH, FBH, and NEH) are supported....

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Journal ArticleDOI
TL;DR: In this article, the authors examined the causal relationships among ICT diffusion, innovation diffusion, venture capital investment, and economic growth for 25 countries in Europe for the period from 1989 to 2016.

53 citations

Journal ArticleDOI
TL;DR: The main results show that the coupling coordination degree of government support, financial support, and innovation in the eastern, central, and western region is on the rise, but there are large differences between regions.
Abstract: This paper reveals the coupling mechanism of government support, financial support, and innovation. Using panel data from 28 provinces in China from 2007 to 2016 as a research sample, the coupling coordination degree model is used to measure the coupling coordination degree of government support, financial support, and innovation, and the empirical analysis of its relationship with economic development is conducted through projection pursuit model, static panel data model and dynamic panel data model. The main results show that: (1) The coupling coordination degree of government support, financial support, and innovation in the eastern, central, and western region is on the rise, but there are large differences between regions. (2) The coupling coordination degree of government support, financial support, and innovation has a significant positive impact on economic development, and there are regional differences in its role in promoting economic development. That is, the coupling coordination degree of government support, financial support, and innovation has significantly promoted the economic development of the eastern region, but has no significant impact on the economic development of the central and western region.

23 citations


Cites background from "Venture Capital and Innovation: Evi..."

  • ...The empirical results showed that venture capital plays an important role in promoting the development of innovation in most countries [15]....

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Journal ArticleDOI
TL;DR: This study comprehensively investigates the impact of venture capital on the innovation input and output of enterprises, enhancing the integrity and reliability of previous research conclusions.
Abstract: This paper is to explore the impact of entrepreneurial psychological capital and capital heterogeneity on venture capital behavior, and further analyze the effect of venture capital on the innovation activities of enterprises. Based on the existing research results, this paper proposed hypotheses on the relationship between venture capital and technological innovation. According to the data samples of growth enterprises market (GEM) listed companies from 2010 to 2016, the main research variables were defined and a theoretical analysis model was constructed. The theory and empirical research clarify the relationship between venture capital and technological innovation. (1) According to the regression results of venture capital participation as well as innovation input and innovation output, the regression coefficients of venture capital participation are 0.609 and 0.203, which are significant at the levels of 10 and 1%, respectively. It indicates that venture capital participation has a positive impact on the innovation input and output of enterprises. (2) The coefficient of venture capital participation is positive, and the coefficient of HHI×VC¯ is significantly negative. Therefore, the degree of product market competition has a significant moderating effect on the relationship between venture capital participation and technological innovation. Venture capital provides funding support for technological innovation in startups. At the same time, because it holds a certain percentage of shares, it participates in enterprise innovation activities and provides guidance for companies to maintain profitable growth, thereby improving their innovation awareness and level. This research makes up for the shortcomings of the previous research model that uses a single dimension to measure technological innovation. As a result, this study comprehensively investigates the impact of venture capital on the innovation input and output of enterprises, enhancing the integrity and reliability of previous research conclusions.

9 citations

Posted Content
TL;DR: In this paper, the impact of VC finance on the innovation output of new technology-based firms (NTBFs) as reflected by their patenting activity is analyzed empirically.
Abstract: The aim of this paper is to analyse empirically the impact of venture capital (VC) finance on the innovation output of new technology-based firms (NTBFs) as reflected by their patenting activity. In particular, we compare the patenting rates of VC-backed and non-VC-backed NTBFs. To investigate whether VC investments spur patenting activity, we consider a unique longitudinal dataset composed of 351 Italian NTBFs operating in high-tech manufacturing industries and software, 33 of which are VC-backed. We estimate different econometric models on panel data, controlling for factors that may affect a firm's patenting behaviour other than the presence of VC, like founders' human capital and use of other sources of financing. The results show that VC investments positively affect subsequent patenting activity and that before receiving VC, VC-backed firms do not exhibit a higher patenting propensity than other firms.

2 citations

References
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Journal ArticleDOI
TL;DR: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples.
Abstract: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples. If each element of a vector of time series x first achieves stationarity after differencing, but a linear combination a'x is already stationary, the time series x are said to be co-integrated with co-integrating vector a. There may be several such co-integrating vectors so that a becomes a matrix. Interpreting a'x,= 0 as a long run equilibrium, co-integration implies that deviations from equilibrium are stationary, with finite variance, even though the series themselves are nonstationary and have infinite variance. The paper presents a representation theorem based on Granger (1983), which connects the moving average, autoregressive, and error correction representations for co-integrated systems. A vector autoregression in differenced variables is incompatible with these representations. Estimation of these models is discussed and a simple but asymptotically efficient two-step estimator is proposed. Testing for co-integration combines the problems of unit root tests and tests with parameters unidentified under the null. Seven statistics are formulated and analyzed. The critical values of these statistics are calculated based on a Monte Carlo simulation. Using these critical values, the power properties of the tests are examined and one test procedure is recommended for application. In a series of examples it is found that consumption and income are co-integrated, wages and prices are not, short and long interest rates are, and nominal GNP is co-integrated with M2, but not M1, M3, or aggregate liquid assets.

27,170 citations

Journal ArticleDOI
TL;DR: In this article, the authors proposed new tests for detecting the presence of a unit root in quite general time series models, which accommodate models with a fitted drift and a time trend so that they may be used to discriminate between unit root nonstationarity and stationarity about a deterministic trend.
Abstract: SUMMARY This paper proposes new tests for detecting the presence of a unit root in quite general time series models. Our approach is nonparametric with respect to nuisance parameters and thereby allows for a very wide class of weakly dependent and possibly heterogeneously distributed data. The tests accommodate models with a fitted drift and a time trend so that they may be used to discriminate between unit root nonstationarity and stationarity about a deterministic trend. The limiting distributions of the statistics are obtained under both the unit root null and a sequence of local alternatives. The latter noncentral distribution theory yields local asymptotic power functions for the tests and facilitates comparisons with alternative procedures due to Dickey & Fuller. Simulations are reported on the performance of the new tests in finite samples.

16,874 citations

Journal ArticleDOI
TL;DR: In this paper, the authors consider a nonstationary vector autoregressive process which is integrated of order 1, and generated by i.i.d. Gaussian errors, and derive the maximum likelihood estimator of the space of cointegration vectors and the likelihood ratio test of the hypothesis that it has a given number of dimensions.

16,189 citations

Journal ArticleDOI
TL;DR: In this article, the authors consider pooling cross-section time series data for testing the unit root hypothesis, and they show that the power of the panel-based unit root test is dramatically higher, compared to performing a separate unit-root test for each individual time series.

10,792 citations