•Impact of government-managed (GVC) and independent venture capital (IVC) funds on the growth of European high-tech firms.•We use the VICO longitudinal dataset sponsored by the European Union under ...the 7th Framework Programme.•IVC positively impacts sales growth, GVC does not affect neither sales nor employees growth.•A positive impact of syndicated investments on sales growth is found, but only when leaded by IVC.•Low governments’ ability to support high-tech firms through a direct involvement in VC markets.
Using a new European Union-sponsored firm-level longitudinal dataset, we assess the impact of government-managed (GVC) and independent venture capital (IVC) funds on the sales and employee growth of European high-tech entrepreneurial firms. Our results show that the main statistically robust and economically relevant positive effect is exerted by IVC investors on firm sales growth. Conversely, the impact of GVC alone appears to be negligible. We also find a positive and statistically significant impact of syndicated investments by both types of investors on firm sales growth, but only when led by IVC investors. Our results remain stable after controlling for endogeneity, survivorship bias, reverse causality, anticipation effects, legal and institutional differences across countries and over time and are stable with respect to potential non-linear effects of age and size of entrepreneurial firms. Overall, our analysis casts doubt on the ability of governments to support high-tech entrepreneurial firms through a direct and active involvement in VC markets.
We investigate the effect of public (PUVC) and private (PRVC) venture capital funds on the sales growth of 6,513 European New Technology-Based Firms (NTBFs) during the period from 1992 to 2009. Our ...results show that PUVC-backed NTBFs underperform with respect to PRVC-backed ones and do not grow more than non-venture capital-backed companies. The impact of PUVC is still not statistically significant (even though it is positive) when PUVC funds target young NTBFs. The only notable exception suggesting a positive and statistically significant impact for PUVCs is when PUVC funds cofinance with PRVC funds, and both target young firms.
Inflection points, kinks, and jumps identify places where the relationship between dependent and independent variables switches in some important way. Although these switch points are often mentioned ...in management research, their presence in the data is either ignored, or postulated ad hoc by testing arbitrarily specified functional forms (e.g., U or inverted U-shaped relationships). This is problematic if we want accurate tests for our theories. To address this issue, we provide an integrative framework for the identification of nonlinearities. Our approach constitutes a precursor step that researchers will want to conduct before deciding which estimation model may be most appropriate. We also provide instructions on how our approach can be implemented, and a replicable illustration of the procedure. Our illustrative example shows how the identification of endogenous switch points may lead to significantly different conclusions compared to those obtained when switch points are ignored or their existence is conjectured arbitrarily. This supports our claim that capturing empirically the presence of nonlinearity is important and should be included in our empirical investigations.
Using a new European Commission‐sponsored longitudinal dataset—the VICO dataset—we assess the impact of independent (IVC) and corporate venture capital (CVC) investments on the economic performance ...of European high‐tech entrepreneurial firms during the period 1992–2010. After controlling for potential sources of endogeneity and selection bias, our results indicate that both IVC and CVC investments boost portfolio firms' economic performance. These effects are mostly due to an increase in real sales value. Moreover, the dynamics of the impact of VC investments on firms’ overall economic performance and its components—real sales value, real fixed assets, and real labor costs—differs depending on the type of investor. Finally, we do not detect any impact related to the syndication of investments by both IVC and CVC investors.
We model a two-party electoral game with rationally inattentive voters. Parties are endowed with different administrative competencies and announce a fiscal platform to be credibly implemented in ...case of electoral success. The budgetary impact of each platform depends on the party’s competence and on a stochastic implementation shock. Voters rely on the announced platform to infer a party’s unobserved competence. In addition, voters receive noisy signals on the impact of each fiscal platform with noise depending ultimately on a voter’s cognitive skills. We predict that the interplay between the desire of parties to win the election (the
incentive
to manipulate voters’ beliefs) and voters’ (lack of) cognitive skills (the
scope
for manipulation) distorts fiscal policies towards excessive budget deficits. The mechanism is that parties attempt to manipulate inferences on their competencies by implementing a loose fiscal policy. The predictions are tested empirically on a sample of advanced economies over years 1999–2008. Our results remain stable after controlling for potentially confounding differences across countries and over time, along with unobserved heterogeneity. Finally, alternative mechanisms potentially driving our results are investigated and ruled out.
Abstract Studies show that founders’ industry-specific experience is beneficial to venture performance. However, we know little on the contingencies associated with such an effect. Using a panel ...dataset of 338 Italian high-tech ventures, we find that founders’ industry-specific experience positively affects venture performance. However, changes in the top management team (TMT) during the initial phases of the venture’s life weaken the positive relationship between founders’ industry-specific experience and venture performance, whereas founders’ functional heterogeneity does not. We further find evidence of substitution effects between founders’ human and social capital affecting venture performance, such that the effect of founders’ industry-specific experience on venture performance is attenuated when a subset of founders had common background prior to founding their venture.
This paper addresses the question of the efficacy of R&D policy measures in support of high-tech start-ups. We show that subsidies awarded on a competitive basis lead to a positive effect, while ...those assigned through an automatic procedure do not.
► We analyze the efficacy of R&D policy measures in support of high-tech start-ups. ► We distinguish selective subsidies from those assigned through automatic procedures. ► Selective R&D subsidies lead to a positive TFP increase of Italian recipient firms. ► Automatic R&D subsidies do not exert any significant effect. ► This evidence is consistent with the certification effect of selective R&D schemes.
Research Summary
Grounding on the literature on resource dependence, board political capital, and principal–principal conflicts, I conceptualize governmental minority shareholding as a governance ...strategy through which ventures access information about future policy shifts and better calibrate their decisions before policy implementation. I test these arguments on multicountry firm‐level longitudinal data about European venture capital (VC)‐backed and comparable non‐VC‐backed companies. By means of a difference‐in‐differences methodology and exploiting the staggered announcement of tax reforms across countries, I show that public VC‐backed companies after a tax reform announcement show higher productivity than non‐VC‐backed ventures, and this effect lasts 4 years. After decomposing productivity, the post‐announcement effect of public VC backing is mainly due to both an output effect (sales value increase) and an enhanced efficiency in the labor factor.
Managerial Summary
Ventures facing market uncertainty may benefit from having a governmental minority shareholder on board. Governmental minority shareholders bring political capital in the form of information about future business‐related policy changes, as well as connections to debt capital providers. Plus, their minority status makes conflicts with the entrepreneur (and other shareholders) less likely. In this way, after a policy reform announcement, entrepreneurs backed by governmental minority shareholders (such as public venture capitalists) can better predict market changes and react more quickly than comparable non‐backed firms to those changes. In sum, governmental minority shareholding represents an effective governance strategy for ventures to reduce their uncertainty and access information and resources that would be out of reach for both the ventures and all other types of shareholders.
•Selective subsidies help new technology-based firms (NTBFs) access R&D alliances.•This applies both to R&D alliances with other firms and to R&D alliances with public research ...organizations/universities.•Founders’ technical education is a key determinant for NTBFs to get the first selective subsidy.•Founders’ previous industry-specific work experience positively moderates the impact of subsidies on the likelihood to form a corporate R&D alliance.
We investigate if and to what extent the receipt of a “selective” subsidy – a public subsidy awarded through a competitive procedure – helps new technology-based firms (NTBFs) to access R&D alliances. In particular, we theoretically enquire and empirically analyze which founding team-level characteristics allow NTBFs to: i) get a selective subsidy; and ii) access an R&D alliance with another firm or a public research organization/university, once the subsidy is awarded. We use a sample of 902 NTBFs that operate in Italy, where industrial policy has never had an explicit and exclusive mandate neither for targeting NTBFs nor for easing their access to R&D networks. By means of several identification strategies and estimation methods, our results point to the relevance of selective subsidies in facilitating NTBFs to enter R&D alliances, independently from the objective of the policy measure. Second, founders’ technical education figures as a key determinant to get the first selective subsidy. Finally, founders’ previous industry-specific work experience allows NTBFs to better exploit the selective subsidy, by positively moderating the impact of the subsidy on the likelihood to establish a corporate R&D alliance.
This paper examines the impact of government versus private independent venture capital (VC) backing on the exit performance of entrepreneurial firms. Our analyses are based on the VICO dataset, ...which avoids the coding problems of VC type in the Thompson Financial SDC dataset. The data indicate that private independent VC-backed companies have better exit performance than government-backed companies. Mixed-syndicates of private-independent and governmental VC investors give rise to a higher (but not statistically different) likelihood of positive exits than that of IVC-backing. Our findings are not influenced by the composition of the syndicate in terms of size and institutional heterogeneity. Our results remain stable after controlling for endogeneity concerns, selection bias, omitted variable bias, legal and institutional differences across countries and over time through several econometric techniques. Moreover, our results are not driven by: i) the holding period of the different types of VC investors; ii) the potential signaling effect of GVC towards IVC investors; iii) the firm's financial structure and net cash-flow ratio; iv) the investment stage; and v) the distance between the VC investor and the target company.
•Governmental (GVC) vs independent venture capital (IVC) impact exit performance•VICO dataset sponsored by the European Union under the 7° Framework Program•IVC positively impacts exit performance, GVC does not.•Positive impact of mixed syndicates, comparable with that of IVC•Results stable after controlling for syndicate size and heterogeneity
PDF
