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    A spatial and sectoral analysis of U.S. technology innovation and venture capital investment performance

    Nadeau, Pierre (2010) A spatial and sectoral analysis of U.S. technology innovation and venture capital investment performance. Working Paper. ResearchGate.

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    Official URL: 10.2139/ssrn.1561857

    Abstract

    The economic impact of venture capital on the U.S. economy is significant. Global Insight (2007) estimated total revenue of venture-backed companies to be $2.3 trillion (17.6% of U.S. GDP) and 10.4 million jobs (9.1% of U.S. private sector employment) resulting from VC-backed IPO and M&A exits - the key determinants of venture capital performance. Thus it is no surprise that policy makers see venture capital as an important instrument of regional economic development. A recent study by Chen et al (2010) assessed the geographic concentration of both venture capital firms and venture capital-financed companies in specific metropolitan areas. Venture capital firms were found to be located in regions with high success rates of venture capital-backed investments as measured by the incidence of exits. Venture capital firms based in locales that were venture capital centers were found to outperform regardless of investment stage or location. The study however paid little attention to the influence of technological innovation on venture capital performance, arguably the most important of all Schumpeterian innovations for technology-based firms. This study seeks to address this specific knowledge gap in venture capital research and practice. It builds on resource-based view (RBV) and knowledge-based view theories which argue that technological innovation is a strategic resource of the firm that can provide competitive advantage and produce superior performance. This research paper is based on matched data compiled from VentureXpertTM, DelphionTM and NBER/USPTO databases. The resulting unique and proprietary dataset consists of 1020 VC-backed US technology company IPO exits across all technology sectors in the 20 years from 1980-2000. The relation between technological innovation of VC-backed firms and venture capital exit performance is examined with a focus on the influence of spatial and sectoral factors which have been found to be meaningful predictors in theories (i.e. regional growth, industrial, cluster and evolutionary theories) explaining the uneven distribution of technological innovation. As predicted by RBV theory technology firms engaged in patenting activity attracted more VC investors but experienced however longer time-to-exit and lower IPO values. Results show that sectoral and spatial factors influence the patenting activity and investment performance of VC-backed technology firms. Patenting activity and dependent variables total VC invested and IPO value are shown to vary significantly across both regions and sectors.

    Metadata

    Item Type: Monograph (Working Paper)
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Management
    Research Centre: Innovation Management Research, Birkbeck Centre for
    Depositing User: Sarah Hall
    Date Deposited: 30 Sep 2014 14:47
    Last Modified: 06 Dec 2016 10:11
    URI: http://eprints.bbk.ac.uk/id/eprint/10638

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