Enabling or Accelerating? The Timing of Innovation and The Different Roles of Venture Capitalists

74 Pages Posted: 16 Apr 2024

See all articles by Andrej Gill

Andrej Gill

Johannes Gutenberg University Mainz

David Heller

Max Planck Institute for Innovation and Competition

Nina A. Michel

Johannes Gutenberg University Mainz

Multiple version iconThere are 2 versions of this paper

Date Written: April 11, 2024

Abstract

Venture capitalists (VCs) shape innovative activities, moving beyond the role of providing financial resources. This paper investigates the role of VCs in firms' innovative performance regarding two mutually exclusive concepts in which they enable or accelerate the patenting activities, distinguishing previously patenting and non-patenting portfolio firms, respectively. To reveal underlying mechanisms, the analyses explore differences in the timing of patenting activities and the level of VC involvement using large-scale VC and firm-level data. We find a positive and persistent enabling effect, suggesting that VCs push for rapid commercialization of inventive ideas by previously non-patenting firms. While we find no accelerating effect on average, high investor involvement and reputable VCs can accelerate the innovative activity of patenting firms by fostering new ideas. Examining firm-level differences in prior patenting experience shows that some target firms rather seek financial support, while others additionally pursue active investor involvement that compensates for their need for expert knowledge. Overall, these findings disclose new and differentiated perspectives on the role of VCs in stimulating the inventive capabilities of their portfolio firms.

Keywords: Venture Capitalists, Investor roles, Innovation, Patents

JEL Classification: G24, D23, L26, O30

Suggested Citation

Gill, Andrej and Heller, David and Michel, Nina A., Enabling or Accelerating? The Timing of Innovation and The Different Roles of Venture Capitalists (April 11, 2024). Available at SSRN: https://ssrn.com/abstract=4791121 or http://dx.doi.org/10.2139/ssrn.4791121

Andrej Gill

Johannes Gutenberg University Mainz ( email )

Saarstr. 21
Jakob Welder-Weg 4
Mainz, 55122
Germany

David Heller (Contact Author)

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, Bayern 80539
Germany

HOME PAGE: http://www.david-heller.com

Nina A. Michel

Johannes Gutenberg University Mainz ( email )

Saarstr. 21
Jakob Welder-Weg 4
Mainz, 55122
Germany

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