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High-tech entrepreneurial firms’ innovation in different institutional settings. Do venture capital and private equity have complementary or substitute effects?

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  • Christian Corsi
  • Antonio Prencipe

Abstract

The paper explores whether venture capital (VC) and private equity (PE) investments have complementary or substitute effects on innovation in high-tech entrepreneurial firms in different institutional settings, focusing on different levels of capital market development, entrepreneurial culture, and intellectual property rights protection. Using a panel sample of 326 firms from 12 EU countries observed from 2009–2013, the empirical results show that the VC/PE effect on high-tech entrepreneurial firms’ innovation is stronger in countries with a less-developed capital market. This suggests that VC/PE investments play a substitute role. A partial substitute role of VC/PE is also detected in firms located in countries with a low entrepreneurial culture. However, no significant evidence emerged regarding the level of protection of intellectual property rights. The results are generally robust to various econometric specifications. The implications of the resulting framework, the study’s limitations, and opportunities for further research are also discussed.

Suggested Citation

  • Christian Corsi & Antonio Prencipe, 2019. "High-tech entrepreneurial firms’ innovation in different institutional settings. Do venture capital and private equity have complementary or substitute effects?," Industry and Innovation, Taylor & Francis Journals, vol. 26(9), pages 1023-1074, October.
    • Handle: RePEc:taf:indinn:v:26:y:2019:i:9:p:1023-1074
    DOI: 10.1080/13662716.2018.1561358
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    Cited by:

    1. Honjo, Yuji, 2021. "The impact of founders’ human capital on initial capital structure: Evidence from Japan," Technovation, Elsevier, vol. 100(C).
    2. Honjo, Yuji & Kwak, Charee & Uchida, Hirofumi, 2022. "Initial funding and founders’ human capital: An empirical analysis using multiple surveys for start-up firms," Japan and the World Economy, Elsevier, vol. 63(C).
    3. Hameeda A. AlMalki & Christopher M. Durugbo, 2023. "Systematic review of institutional innovation literature: towards a multi-level management model," Management Review Quarterly, Springer, vol. 73(2), pages 731-785, June.

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