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Do publicly backed venture capital investments promote innovation? Differences between privately and publicly backed funds in the UK venture capital market

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  • Pierrakis, Yannis
  • Saridakis, George

Abstract

This paper examines the link between publicly backed venture capital funds and business innovation in the UK venture capital market. In examining this relationship, the research empirically analyses the characteristics of 4113 investment deals made to 2359 UK based companies. We use patents as a proxy for innovation and find that obtaining investment solely from publicly backed VC funds, reduces the probability of the recipient company to apply for a patent compared with those companies that receive investments from private VC funds. In contrast, the probability of a company to have a patent or have applied for one does not vary significantly between companies that receive investments from both the public and the private sector and those companies that receive investments solely from private VC funds. The results have implications for both policy makers and practitioners and stress the importance of co-investments between publicly backed and private venture capital funds to promote innovation.

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  • Pierrakis, Yannis & Saridakis, George, 2017. "Do publicly backed venture capital investments promote innovation? Differences between privately and publicly backed funds in the UK venture capital market," Journal of Business Venturing Insights, Elsevier, vol. 7(C), pages 55-64.
    • Handle: RePEc:eee:jobuve:v:7:y:2017:i:c:p:55-64
    DOI: 10.1016/j.jbvi.2017.02.002
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    3. Dong, Weijia & Li, Ye & Lv, Xin & Yu, Chang, 2021. "How does venture capital spur the innovation of environmentally friendly firms? Evidence from China," Energy Economics, Elsevier, vol. 103(C).
    4. Richard T Harrison & Babangida Yohanna & Yannis Pierrakis, 2020. "Internationalisation and localisation: Foreign venture capital investments in the United Kingdom," Local Economy, London South Bank University, vol. 35(3), pages 230-256, May.
    5. Devarakonda, Ramakrishna & Liu, Aqi, 2023. "A legitimacy-based view of the impact of government venture capital on startup innovation: Evidence from a transition economy," Other publications TiSEM 3afc4804-f469-4dd7-bb34-8, Tilburg University, School of Economics and Management.
    6. Abdol Majid Saadat Nezhad & Tahmoures Sohrabi & Nasrollah Shadnoosh & Abbas Toloie Eshlaghy, 2017. "A New Approach to Challenges of Venture Capital in Financing the Industrial Clusters through Cooperative Models and Venture Funds in Iran," International Journal of Economics and Financial Issues, Econjournals, vol. 7(6), pages 111-119.
    7. Nawab Khan & Haitao Qu & Jing Qu & ChunMiao Wei & Shihao Wang, 2021. "Does Venture Capital Investment Spur Innovation? A Cross-Countries Analysis," SAGE Open, , vol. 11(1), pages 21582440211, March.
    8. Köppl-Turyna, Monika & Köppl, Stefan & Bittó, Virág, 2022. "Herausforderungen in der Finanzierung der Energiewende und Rolle des Risikokapitals," Policy Notes 51, EcoAustria – Institute for Economic Research.
    9. Michaelis, Timothy L. & Aladin, Roberly & Pollack, Jeffrey M., 2018. "Innovation culture and the performance of new product launches: A global study," Journal of Business Venturing Insights, Elsevier, vol. 9(C), pages 116-127.
    10. Yannis Pierrakis & George Saridakis, 2019. "The role of venture capitalists in the regional innovation ecosystem: a comparison of networking patterns between private and publicly backed venture capital funds," The Journal of Technology Transfer, Springer, vol. 44(3), pages 850-873, June.
    11. Gu, Jing & Zhang, Fujuan & Xu, Xun & Xue, Chaokai, 2023. "Stay or switch? The impact of venture capitalists' movement across network communities on enterprises’ innovation performance," Technovation, Elsevier, vol. 125(C).
    12. Jonathan Labbé, 2020. "Venture capital risk, start-ups and innovation: the syndication of venture capital investments recipe [Capital-risque, start-ups et innovation : la recette du financement par syndication]," Post-Print hal-03000103, HAL.
    13. Jianjun Xu & Lijie Yu & Rakesh Gupta, 2020. "Evaluating the Performance of the Government Venture Capital Guiding Fund Using the Intuitionistic Fuzzy Analytic Hierarchy Process," Sustainability, MDPI, vol. 12(17), pages 1-24, August.
    14. Jonathan Labbe, 2021. "Study of The Relationship Between Public and Private Venture Capitalists in France: A Qualitative Approach," Post-Print hal-03381477, HAL.
    15. Maran, Raluca, 2022. "Improving MSMEs’ access to start-up financing in ASEAN countries," MPRA Paper 114501, University Library of Munich, Germany.
    16. Jonathan Labbe, 2021. "Study of The Relationship Between Public and Private Venture Capitalists in France: A Qualitative Approach," Papers 2110.09098, arXiv.org.
    17. Fakhimi, MohammadAmin & Miremadi, Iman, 2022. "The impact of technological and social capabilities on innovation performance: a technological catch-up perspective," Technology in Society, Elsevier, vol. 68(C).

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