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Venture Capital, Innovation, and Economic Developmemt

Author

Listed:
  • Richard Florida

    (Carnegie Mellon University)

  • Donald F. Smith Jr.

    (Carnegie Mellon University)

Abstract

Venture capital is a unique form of finance capital with special implications for high-technology economic development. Conventional wisdom suggests that venture capital will stimulate high-technology development. This is reflected in state policies that seek to generate local high technology by overcoming regional venture capital gaps. Here the authors report findings from a two-year study, supported by the U.S. Economic Development Administration, that resulted in a new data base on venture capital supply and investment. The findings of the research indicate that venture capital is not sufficient to stimulate high-technology development. In fact, U.S. venture capital exhibits a strong flow toward established high-technology regions such as Silicon Valley and Route 128. This fact leads to the conclusion that venture capitalists are proficient in locating high-technology investment opportunities where they exist and that, as such, capital gaps are a reflection of underlying structural weaknesses in an area's technology base. Policymakers should turn their attention away from finance capital programs and return to the basics of building a strong technological infrastructure and integrated industrial base.

Suggested Citation

  • Richard Florida & Donald F. Smith Jr., 1990. "Venture Capital, Innovation, and Economic Developmemt," Economic Development Quarterly, , vol. 4(4), pages 345-360, November.
  • Handle: RePEc:sae:ecdequ:v:4:y:1990:i:4:p:345-360
    DOI: 10.1177/089124249000400405
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    Cited by:

    1. Bürer, Mary Jean & Wüstenhagen, Rolf, 2009. "Which renewable energy policy is a venture capitalist's best friend? Empirical evidence from a survey of international cleantech investors," Energy Policy, Elsevier, vol. 37(12), pages 4997-5006, December.
    2. David Barkley & David Freshwater & Deborah M. Markley & Julia Sass Rubin & Ron Shaffer, 1999. "A national snapshot for rural equity market innovation," Proceedings – Rural and Agricultural Conferences, Federal Reserve Bank of Kansas City, issue Aug, pages 59-70.
    3. Sanwar A. Sunny & Cheng Shu, 2019. "Investments, incentives, and innovation: geographical clustering dynamics as drivers of sustainable entrepreneurship," Small Business Economics, Springer, vol. 52(4), pages 905-927, April.
    4. Alessandro Rosiello & Stuart Parris, 2009. "The patterns of venture capital investment in the UK bio-healthcare sector: the role of proximity, cumulative learning and specialisation," Venture Capital, Taylor & Francis Journals, vol. 11(3), pages 185-211, February.
    5. Rudra P. Pradhan & Rana P. Maradana & Danish B. Zaki & Saurav Dash & Manju Jayakumar & Kunal Gaurav, 2017. "Venture Capital and Innovation: Evidence from European Economic Area Countries," International Journal of Innovation and Technology Management (IJITM), World Scientific Publishing Co. Pte. Ltd., vol. 14(06), pages 1-30, December.
    6. Prilepskiy, Ilya (Прилепский, Илья), 2017. "Factors of Exports Dynamics and Import Substitution after the Sharp Exchange Rate Depreciation [Факторы Динамики Экспорта И Импортозамещения После Резкого Ослабления Курса Национальной Валюты]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 3, pages 100-133, June.

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