Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers

72 Pages Posted: 2 Nov 2020 Last revised: 10 Oct 2023

See all articles by Ufuk Akcigit

Ufuk Akcigit

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); Center for Economic and Policy Research (CEPR)

Sina Ates

Board of Governors of the Federal Reserve System

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

Richard Townsend

University of California, San Diego (UCSD) - Rady School of Management

Yulia Zhestkova

University of Chicago

Multiple version iconThere are 3 versions of this paper

Date Written: October 2023

Abstract

The treatment of foreign investors is a contentious topic in U.S. entrepreneurship policy. We
model a setting where foreign corporate investments in Silicon Valley may allow U.S. entrepreneurs
to pursue technologies that they could not otherwise, but may also lead to knowledge
spillovers. We show that despite the benefits from such inbound investments for U.S. firms, it
may be optimal for the U.S. government to raise their costs to deter these investments. Using as
comprehensive as possible a sample of investments by foreign corporate investors in U.S. startups,
we find evidence consistent with the presence of knowledge spillovers to foreign investors.

Keywords: Innovation, Foreign Direct Investment, Corporate Venture Capital

JEL Classification: O31, O33, G24, F13

Suggested Citation

Akcigit, Ufuk and Ates, Sina and Lerner, Josh and Townsend, Richard and Zhestkova, Yulia, Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers (October 2023). Harvard Business School Entrepreneurial Management Working Paper No. 21-043, Available at SSRN: https://ssrn.com/abstract=3691533 or http://dx.doi.org/10.2139/ssrn.3691533

Ufuk Akcigit

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

HOME PAGE: http://www.ufukakcigit.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Center for Economic and Policy Research (CEPR) ( email )

London
United Kingdom

Sina Ates

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Josh Lerner (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Harvard University - Private Capital Research Institute ( email )

114 Western Ave
Allston, MA 02134
United States

Richard Townsend

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

Yulia Zhestkova

University of Chicago

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