Cleantech Venture Capital Around the World

49 Pages Posted: 21 Feb 2016

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Irene Henriques

York University - Schulich School of Business

Perry Sadorsky

York University - Schulich School of Business

Date Written: February 20, 2016

Abstract

Cleantech venture capital investment differs from the typical venture capital investment in that it tends to be very capital intensive and faces greater technology risks associated with the functioning of the technology, scalability and exit requirements than the typical venture capital investment. Moreover, unlike the typical venture capital investment, the benefits arising from cleantech cannot be totally captured by the venture capitalist as many of its benefits accrue to society via reduced environmental degradation and better health and quality of life outcomes. The public goods literature posits that such externalities reduce investment in cleantech below the socially optimal level. We seek to determine whether there are countervailing factors which may incite greater cleantech investment. We argue that oil prices, increased stakeholder attention, as well as the impact of various formal and informal institutions are such factors. This paper provides a cross-country analysis of the determinants of cleantech venture capital investment with a unique worldwide dataset of 31 countries spanning 1996-2010. The data show consistent evidence of a pronounced role for oil prices in driving cleantech venture capital deals, which is more important than other economic, legal or institutional variables. Cleantech media coverage is likewise a statistically significant determinant of cleantech venture capital investment and as economically significant as other country level legal, governance, and cultural variables. Uncertainty avoidance has a negative impact on cleantech venture capital investment, as well as a moderating effect on other variables.

Keywords: Venture Capital, Cleantech, Governance, Uncertainty avoidance, Law and Finance

JEL Classification: G24, G28

Suggested Citation

Cumming, Douglas J. and Henriques, Irene and Sadorsky, Perry, Cleantech Venture Capital Around the World (February 20, 2016). International Review of Financial Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2735377

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

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

Irene Henriques

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Perry Sadorsky (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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