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Venture capital investments and the technological performance of portfolio firms

Lahr, Henry and Mina, Andrea (2016). Venture capital investments and the technological performance of portfolio firms. Research Policy, 45(1) pp. 303–318.

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DOI (Digital Object Identifier) Link: https://doi.org/10.1016/j.respol.2015.10.001
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Abstract

What is the relationship between venture capitalists’ selection of investment targets and the effects of these investments on the patenting performance of portfolio companies? In this paper, we set out a modelling and estimation framework designed to discover whether venture capital (VC) increases the patenting performance of firms or whether this effect is a consequence of prior investment selection based on firms’ patent output. We develop simultaneous models predicting the likelihood that firms attract VC financing, the likelihood that they patent, and the number of patents applied for and granted. Fully accounting for the endogeneity of investment, we find that the effect of VC on patenting is insignificant or negative, in contrast to the results generated by simpler models with independent equations. Our findings show that venture capitalists follow patent signals to invest in companies with commercially viable know-how and suggest that they are more likely to rationalise, rather than increase, the patenting output of portfolio firms.

Item Type: Journal Item
Copyright Holders: 2015 The Authors
ISSN: 1873-7625
Keywords: venture capital; patenting; selection; signalling; innovation
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
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Item ID: 44849
Depositing User: Henry Lahr
Date Deposited: 17 Nov 2015 09:46
Last Modified: 05 Jun 2019 10:57
URI: http://oro.open.ac.uk/id/eprint/44849
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