Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers
60 Pages Posted: 24 Sep 2020 Last revised: 15 May 2021
Date Written: February 19, 2021
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 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
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