Venture Capital in Europe and the Financing of Innovative Companies

41 Pages Posted: 5 Dec 2002

See all articles by Laura Bottazzi

Laura Bottazzi

University of Bologna - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Marco Da Rin

Tilburg University, Department of Finance; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Abstract

Venture capital is considered to be the most appropriate form of financing for innovative firms in high-tech sectors. Venture capital has greatly developed over the last three decades in the United States, but much less so in Europe, where policy-makers are striving to help channel more funds into this form of financial intermediation. In this paper we provide the first assessment of venture capital in Europe. We document its development in the 1990s and compare it with that of American venture capital. We find the wedge between them to be large and growing. We then look at the involvement of venture capital with some of Europe's most innovative and successful companies, those listed on Europe's "new" stock markets. Venture capital is effective in helping these firms overcome credit constraints, and thus to be born in the first place. Using a unique, hand collected data set from the listing prospectuses and annual reports of these companies, we find European venture capital to have a limited effect on their ability to raise equity capital, grow, and create jobs. We conclude that public support of the European venture capital industry should look at both its growth and at its maturation.

Suggested Citation

Bottazzi, Laura and Da Rin, Marco, Venture Capital in Europe and the Financing of Innovative Companies. Economic Policy, Vol. 17, pp. 229-269, 2002. Available at SSRN: https://ssrn.com/abstract=312213

Laura Bottazzi (Contact Author)

University of Bologna - Department of Economics

Strada Maggiore 45
Bologna, 40125
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 3326 (Phone)
+39 02 5836 3302 (Fax)

HOME PAGE: http://www.igier.uni-bocconi.it/bottazzi

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Marco Da Rin

Tilburg University, Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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