Venture Capital and the Diffusion of Knowledge

64 Pages Posted: 6 Mar 2014

See all articles by Juanita Gonzalez-Uribe

Juanita Gonzalez-Uribe

London School of Economics & Political Science (LSE) - Department of Finance

Date Written: February 16, 2014

Abstract

I estimate the impact of venture capital (VC) on knowledge diffusion by comparing patent citations before and after companies secure VC. I find that a patent's citations increase following VC financing, particularly those made by other companies also financed by the same VC investor. Instrumental variables estimates exploiting variation in the assets of pension funds that allocate capital to VC suggest a causal interpretation of the findings. I argue that by certifying commercial value, VC facilitates knowledge diffusion and thus generates an externality on innovation. The findings help explain why VC is more effective in stimulating innovation than corporate R&D.

Keywords: Venture capital, Innovation

JEL Classification: G24, O31, O32, O33

Suggested Citation

Gonzalez-Uribe, Juanita, Venture Capital and the Diffusion of Knowledge (February 16, 2014). Available at SSRN: https://ssrn.com/abstract=2405362 or http://dx.doi.org/10.2139/ssrn.2405362

Juanita Gonzalez-Uribe (Contact Author)

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom
+442074057686 (Phone)

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