Venture Capital and Knowledge Transfer

57 Pages Posted: 17 Feb 2015

See all articles by Roberta Dessi

Roberta Dessi

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ)

Nina Yin

Central University of Finance and Economics (CUFE) - China Center for Human Capital and Labor Market Research; Tulane University

Multiple version iconThere are 2 versions of this paper

Date Written: February 2015

Abstract

This paper explores a new role for venture capitalists, as knowledge intermediaries. A venture capital investor can communicate valuable knowledge to an entrepreneur, facilitating innovation. The venture capitalist can also communicate the entrepreneur's innovative knowledge to other portfolio companies. We study the costs and benefits of these two forms of knowledge transfer, and their implications for investment, innovation, and product market competition. The model also sheds light on the choice between venture capital and other forms of finance, and the determinants of the decision to seek patent protection for innovations. Our analysis provides a rationale for the use of contingencies (specifically, patent approval) in VC contracts documented by Kaplan and Stromberg (2003), and for recent evidence on patterns of syndication among venture capitalists.

Keywords: competition, contracts, innovation, knowledge intermediaries, patents, venture capital

JEL Classification: D82, D86, G24, L22

Suggested Citation

Dessi, Roberta and Yin, Nina, Venture Capital and Knowledge Transfer (February 2015). CEPR Discussion Paper No. DP10421. Available at SSRN: https://ssrn.com/abstract=2566324

Roberta Dessi (Contact Author)

University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

Manufacture des Tabacs
21 Allees de Brienne
Toulouse, 31000
France

Nina Yin

Central University of Finance and Economics (CUFE) - China Center for Human Capital and Labor Market Research ( email )

Room 609 Academic Hall
39 South College Road
Beijing, 100081
China

Tulane University ( email )

6823 St Charles Ave
New Orleans, LA 70118
United States

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