Venture Capital and the Financing of Innovation

35 Pages Posted: 12 May 2011

See all articles by Donia Trabelsi

Donia Trabelsi

TELECOM Ecole de Management; Université Paris I Panthéon-Sorbonne

Ghasem A. Shiri

Université Paris I Panthéon-Sorbonne

Date Written: May 1, 2011

Abstract

Innovation is associated to high cost and high level of risk. Many firms cannot finance this activity with internal financial resources. They need outside investors to finance their innovative projects. Venture capitalist funding seems to be an appropriate alternative especially when the firm is young. In this paper we study the relationship between a firm's innovation activity and venture capital. We have used different databases on innovative activity and venture capital financing in France's manufacturing sector for the period 1993-2006. First we examine the effect of venture capital financing on innovation, and second the impact of firms' innovation on venture capitalists' behaviour towards these firms. Our results show that the presence of venture capitalists enhances the innovation intensity of a firm. Furthermore we find that SMEs profit more from VC contribution than biggest one.

Suggested Citation

Trabelsi, Donia and Shiri, Ghasem A., Venture Capital and the Financing of Innovation (May 1, 2011). International Conference of the French Finance Association (AFFI), May 11-13, 2011. Available at SSRN: https://ssrn.com/abstract=1836800 or http://dx.doi.org/10.2139/ssrn.1836800

Donia Trabelsi (Contact Author)

TELECOM Ecole de Management ( email )

9, rue Charles Fourier
Évry, Ile de France 91011
France
01.60.76.42.85 (Phone)

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Ghasem A. Shiri

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

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