Venture Capital Investment and Labor Market Performance: A Panel Data Analysis

Abstract

Labor market performance tends to vary across countries and over time.These variances are investigated in regard to venture capital (VC) support provided within these countries to assist the creation of new business and job opportunities.When comparing the VC market of the United States to that of some European countries, the U.S. market has been much more successful in creating and maintaining a venture capital market. Upon comparison, both the United States and Europe differ in the total level of VC investments and in the structure of the investments.While many European markets utilize banks for VC backing and focus on manufacturing and consumer industry, the United States uses private VC support and focuses on computer, telecommunications, and biomedical industries. Following a brief overview of theoretical considerations of successful VC markets, the empirical data of the analysis are presented.Panel data from twenty Organization of Economic Cooperation and Development (OECD) countries from the period 1986 to 1999 are analyzed via several formulas.The variables are discussed, and the results indicate VC investment does improve labor market performance by reducing unemployment and increasing employment.The long-term effects and areas for future research are considered, as are the limitations of the findings. (AKP)

Keywords: Organisation for Economic Co-operation & Development (OECD), Venture capital, Job creation, Macroeconomics, Venture capital markets, Private investments, Public investments, Labor markets, Employment rates, Firm performance, Labor economics