Assessing the Contribution of Venture Capital to Innovation

We examine the influence of venture capital on patented inventions in the United States across twenty industries over three decades. We address concerns about causality in several ways, including exploiting a 1979 policy shift that spurred venture capital fundraising. We find that increases in ventu...

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Bibliographic Details
Published in:The Rand journal of economics 2000, Vol.31 (4), p.674-692
Main Authors: Kortum, Samuel, Lerner, Josh
Format: Article
Language:English
Subjects:
Business innovation
Disbursements
Economic aspects
Financial services industries
Funding
Industrial innovations
Innovation
Innovations
Intellectual property
Inventions
Manufacturing industries
Production functions
Research and development
Studies
Technological innovation
Venture capital
Venture capital companies
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Summary:We examine the influence of venture capital on patented inventions in the United States across twenty industries over three decades. We address concerns about causality in several ways, including exploiting a 1979 policy shift that spurred venture capital fundraising. We find that increases in venture capital activity in an industry are associated with significantly higher patenting rates. While the ratio of venture capital to R&D averaged less than 3% from 1983-1992, our estimates suggest that venture capital may have accounted for 8% of industrial innovations in that period.
ISSN:0741-6261
1756-2171
DOI:10.2307/2696354