Venture Capital and Innovation Strategies

M. Da Rin, M.F. Penas

Research output: Working paperDiscussion paperOther research output

1754 Downloads (Pure)


Venture capital is a specialized form of financial intermediation that often provides funding for costly technological innovation. Venture capital firms need to exit portfolio companies within about five years from the investment to generate returns for institutional investors. This paper is the first to examine the association of venture capital funding with a company’s choice of innovation strategies. We employ a unique dataset of over 10,000 innovative Dutch companies, some of which received venture financing. The data include detailed information on patent applications, innovation activities, financing sources, and other company characteristics. We find that companies backed by venture capital focus on the buildup of absorptive capacity, by engaging in in-house R&D, while at the same time acquiring external knowledge. We interpret this finding as a consequence of the time horizon of venture capital firms. Our results suggest that the correlation between venture capital funding and the build-up of absorptive capacity is not only due to a selection effect. We derive implications of these findings for corporate strategy and public policy.
Original languageEnglish
Place of PublicationTilburg
Number of pages33
Publication statusPublished - 30 Apr 2015

Publication series

NameTILEC Discussion Paper


  • Venture Capital
  • Entrepreneurship
  • Innovation Strategy
  • Research & Development
  • Public Policy


Dive into the research topics of 'Venture Capital and Innovation Strategies'. Together they form a unique fingerprint.

Cite this