Journal
INDUSTRY AND INNOVATION
Volume 26, Issue 9, Pages 1023-1074Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/13662716.2018.1561358
Keywords
High-tech entrepreneurial firm; firm innovation; venture capital (VC); private equity (PE); Europe
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The paper explores whether venture capital (VC) and private equity (PE) investments have complementary or substitute effects on innovation in high-tech entrepreneurial firms in different institutional settings, focusing on different levels of capital market development, entrepreneurial culture, and intellectual property rights protection. Using a panel sample of 326 firms from 12 EU countries observed from 2009-2013, the empirical results show that the VC/PE effect on high-tech entrepreneurial firms' innovation is stronger in countries with a less-developed capital market. This suggests that VC/PE investments play a substitute role. A partial substitute role of VC/PE is also detected in firms located in countries with a low entrepreneurial culture. However, no significant evidence emerged regarding the level of protection of intellectual property rights. The results are generally robust to various econometric specifications. The implications of the resulting framework, the study's limitations, and opportunities for further research are also discussed.
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