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

Author

Listed:
  • Ufuk Akcigit

    (University of Chicago - Department of Economics; NBER; CEPR)

  • Sina T. Ates

    (Federal Reserve Board of Governors)

  • Josh Lerner

    (Harvard University - Harvard Business School; NBER)

  • Richard R. Townsend

    (University of California at San Diego - Rady School of Management)

  • Yulia Zhestkova

    (University of Chicago - Department of Economics)

Abstract

The treatment of foreign investors has been a contentious topic in U.S. entrepreneurship policy in recent years. This paper examines foreign corporate investments in Silicon Valley from a theoretical and empirical perspective. We model a setting where such funding may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to spillovers to the overseas firm providing the financing and the nation where it is based. 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 non-U.S. corporate investors in U.S. start-ups between 1976 and 2015, we find evidence consistent with the presence of knowledge spill-overs to foreign investors.

Suggested Citation

  • Ufuk Akcigit & Sina T. Ates & Josh Lerner & Richard R. Townsend & Yulia Zhestkova, 2020. "Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers," Working Papers 2020-136, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2020-136
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    2. Sabrina T. Howell & Josh Lerner & Ramana Nanda & Richard R. Townsend, 2020. "How Resilient is Venture-Backed Innovation? Evidence from Four Decades of U.S. Patenting," NBER Working Papers 27150, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Innovation; foreign direct investment; corporate venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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