The Effect of Venture Capital on Innovation Strategies
NBER Working Paper No. 13636
We examine a unique dataset of Dutch companies, some of which have received venture financing. The data include detailed information on innovation activities and other company characteristics. We analyse the role of venture finance in influencing innovation strategies. We find that venture capitalists push portfolio companies towards building absorptive capacity and towards more permanent in-house R&D efforts. By contrast, we find that public funding relaxes financial constraints, but does not lead to a build-up of absorptive capacity. Our results thus highlight the special role of venture capital in shaping companies' innovation strategies.
Published: Entrepreneurial Financing, Advice, and Agency Costs, Roland Strausz, in Entrepreneurship: Strategy and Structure, Journal of Economics and Management Strategy 18(3), Fall 2009 (Blackwell Publishing)