Governmental and Independent Venture Capital Investments in Europe: A Firm-Level Performance Analysis

54 Pages Posted: 17 Jul 2013 Last revised: 11 Mar 2017

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Luca Grilli

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering

Samuele Murtinu

University of Groningen

Date Written: June 30, 2014

Abstract

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 variables 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; v) the distance between the VC investor and the target company.

Keywords: independent venture capital; governmental venture capital; syndication; exit performance; public-private partnership

JEL Classification: G24, G3, M13

Suggested Citation

Cumming, Douglas J. and Grilli, Luca and Murtinu, Samuele, Governmental and Independent Venture Capital Investments in Europe: A Firm-Level Performance Analysis (June 30, 2014). Journal of Corporate Finance, 42, pp. 439-459 (2017)., Available at SSRN: https://ssrn.com/abstract=2294746 or http://dx.doi.org/10.2139/ssrn.2294746

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Luca Grilli

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering ( email )

Via Lambruschini 4C - building 26/A
Milano, 20156
Italy

Samuele Murtinu (Contact Author)

University of Groningen ( email )

Postbus 72
9700 AB Groningen
Netherlands

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