Venture Capital Investments and the Technological Performance of Portfolio Firms

46 Pages Posted: 9 Feb 2017

See all articles by Henry Lahr

Henry Lahr

The Open University - Business School; University of Cambridge - Centre for Business Research (CBR)

Andrea Mina

Scuola Superiore Sant'Anna; Centre for Business Research, Cambridge Judge Business School, University of Cambridge

Date Written: May 11, 2015

Abstract

What is the relationship between venture capitalists’ selection of investment targets and the effects of these investments on the patenting performance of portfolio companies? In this paper, we set out a modelling and estimation framework designed to discover whether venture capital (VC) increases the patenting performance of firms or whether this effect is a consequence of prior investment selection based on firms’ patent output. We develop simultaneous models predicting the likelihood that firms attract VC financing, the likelihood that they patent, and the number of patents applied for and granted. Fully accounting for the endogeneity of investment, we find that the effect of VC on patenting is insignificant or negative, in contrast to the results generated by simpler models with independent equations. Our findings show that venture capitalists follow patent signals to invest in companies with commercially viable know-how and suggest that they are more likely to rationalise, rather than increase, the patenting output of portfolio firms.

Keywords: venture capital, patenting, selection, signalling, innovation

JEL Classification: O31, G24, L26

Suggested Citation

Lahr, Henry and Mina, Andrea, Venture Capital Investments and the Technological Performance of Portfolio Firms (May 11, 2015). Research Policy, Vol. 45, No. 1, 2016, Available at SSRN: https://ssrn.com/abstract=2914432

Henry Lahr (Contact Author)

The Open University - Business School ( email )

Milton Keynes, MK6 7AA
United Kingdom

University of Cambridge - Centre for Business Research (CBR) ( email )

Top Floor, Judge Business School Building
Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.cbr.cam.ac.uk

Andrea Mina

Scuola Superiore Sant'Anna ( email )

Piazza Martiri delle LIbertà 33
Pisa, Pisa 56127
Italy

HOME PAGE: http://https://www.santannapisa.it/it/andrea-mina

Centre for Business Research, Cambridge Judge Business School, University of Cambridge ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://https://www.cbr.cam.ac.uk/people/the-team/andrea-mina/

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