Venture capital and innovation strategies

Marco Da Rin*, Fabiana Penas

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Venture capital investors are specialized financial intermediaries that provide funding for technological innovation with the goal of realizing a capital gain within a few years. We are the first to examine the association of venture capital funding with a company's choice of innovation strategies. We employ a unique data set of over 10,000 innovative Dutch companies, some of which received venture financing. The data include detailed information on patent applications, innovation activities, and other company characteristics. We find that companies backed by venture capital focus on the buildup of absorptive capacity by engaging in both in-house R&D and in the acquisition of external knowledge. Companies that receive public funding, instead, are able to relax their financing constraints and perform more innovation activities without focusing solely on absorptive capacity. Our results also 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
Pages (from-to)781-800
Number of pages20
JournalIndustrial and Corporate Change
Volume26
Issue number5
DOIs
Publication statusPublished - Oct 2017

Keywords

  • RESEARCH-AND-DEVELOPMENT
  • ABSORPTIVE-CAPACITY
  • START-UPS
  • DEVELOPMENT COOPERATION
  • CREATIVE DESTRUCTION
  • EMPIRICAL-EVIDENCE
  • EXTERNAL LINKAGES
  • PUBLIC-POLICY
  • 2 FACES
  • FIRMS

Cite this

Da Rin, Marco ; Penas, Fabiana. / Venture capital and innovation strategies. In: Industrial and Corporate Change. 2017 ; Vol. 26, No. 5. pp. 781-800.
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Venture capital and innovation strategies. / Da Rin, Marco; Penas, Fabiana.

In: Industrial and Corporate Change, Vol. 26, No. 5, 10.2017, p. 781-800.

Research output: Contribution to journalArticleScientificpeer-review

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AB - Venture capital investors are specialized financial intermediaries that provide funding for technological innovation with the goal of realizing a capital gain within a few years. We are the first to examine the association of venture capital funding with a company's choice of innovation strategies. We employ a unique data set of over 10,000 innovative Dutch companies, some of which received venture financing. The data include detailed information on patent applications, innovation activities, and other company characteristics. We find that companies backed by venture capital focus on the buildup of absorptive capacity by engaging in both in-house R&D and in the acquisition of external knowledge. Companies that receive public funding, instead, are able to relax their financing constraints and perform more innovation activities without focusing solely on absorptive capacity. Our results also 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.

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