IDEAS home Printed from https://ideas.repec.org/p/boj/bojron/ron210312a.html
   My bibliography  Save this paper

Venture Capital and Startup Innovation --Big Data Analysis of Patent Data--

Author

Listed:
  • WASHIMI Kazuaki

    (Bank of Japan)

Abstract

With the declining birthrate and ageing population and a decline in the working age population in Japan, Japanese firms face the need to strengthen innovation including the digital domain. Expectations are particularly high for startups as they play a vital role in creating innovative technology. In recent years, there have been a number of initiatives such as expediting patent examinations and introducing an open innovation tax incentive in Japan. It is expected that venture capital (VC) funds will play a pivotal role in providing financing for growth so that startups can continue research and development. On the other hand, due in part to data constraints, there has been limited research on startup innovation on a comprehensive scale and virtually no earlier literature on the impact of VC investments on innovation by portfolio companies in Japan. This paper summarizes those two issues with a focus on the number of patent applications as a proxy for innovation, and it also discusses challenges that lie ahead. First, taking a look at patent applications by startups, around 40 percent of startups have applied for a patent—albeit with significant variation across firms—which appears a much higher proportion than existing firms. An estimate of the impact of VC investments on innovation suggests that in about 60 percent of cases, the number of patent applications by portfolio companies significantly increased compared to a control group. While care should be taken in interpreting those studies as the results vary from firm to firm, these successful cases reflect the possibility that financing and management support including intellectual property management from VC funds could have contributed to an increase in patent applications. Challenges ahead include: (1) expanding investments in VC funds by institutional investors; (2) increasing opportunities for startups to go public in a way that encourages sustainable growth; and (3) establishing intellectual property strategies while maintaining and developing professional human resources in relevant areas.

Suggested Citation

  • WASHIMI Kazuaki, 2021. "Venture Capital and Startup Innovation --Big Data Analysis of Patent Data--," Bank of Japan Research Papers 21-03-12, Bank of Japan.
    • Handle: RePEc:boj:bojron:ron210312a
    as

    Download full text from publisher

    File URL: https://www.boj.or.jp/en/research/brp/ron_2021/data/ron210312a.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. WASHIMI Kazuaki, 2020. "Prospects of Private Equity Funds in Japan-Expectations toward Finance with Ideas and Commitment-," Bank of Japan Research Papers 20-12-11, Bank of Japan.
    2. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2011. "Synth: An R Package for Synthetic Control Methods in Comparative Case Studies," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 42(i13).
    3. MOTOHASHI Kazuyuki, 2011. "Innovation and Entrepreneurship: A first look at linkage data of Japanese patent and enterprise census," Discussion papers 11007, Research Institute of Economy, Trade and Industry (RIETI).
    4. Daniel Kinn, 2018. "Synthetic Control Methods and Big Data," Papers 1803.00096, arXiv.org.
    5. Yusuke Oh & Koji Takahashi, 2020. "R&D and Innovation: Evidence from Patent Data," Bank of Japan Working Paper Series 20-E-7, Bank of Japan.
    6. Fabio Bertoni & Annalisa Croce & Diego D'Adda, 2009. "Venture capital investments and patenting activity of high-tech start-ups: a micro-econometric firm-level analysis," Venture Capital, Taylor & Francis Journals, vol. 12(4), pages 307-326, November.
    7. Selod,Harris & Soumahoro,Souleymane, 2020. "Big Data in Transportation : An Economics Perspective," Policy Research Working Paper Series 9308, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel Albalate & Germà Bel & Ferran A. Mazaira-Font, 2020. "Ensuring Stability, Accuracy and Meaningfulness in Synthetic Control Methods: The Regularized SHAP-Distance Method," IREA Working Papers 202005, University of Barcelona, Research Institute of Applied Economics, revised Apr 2020.
    2. Bruno Ferman & Cristine Pinto & Vitor Possebom, 2020. "Cherry Picking with Synthetic Controls," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 510-532, March.
    3. Patricio Álvarez-Munoz & Marco Faytong-Haro & Dennis Alfredo Peralta Gamboa & Angelo Marcos Aviles Valenzuela & Fernando Pacheco-Olea, 2024. "Evaluating Policy Efficacy in Higher Education: A Synthetic Control Analysis of Ecuador’s Higher Education Law on Research Productivity," Publications, MDPI, vol. 12(3), pages 1-13, September.
    4. Sadeghi, Ali & Kibler, Ewald, 2022. "Do bankruptcy laws matter for entrepreneurship? A Synthetic Control Method analysis of a bankruptcy reform in Finland," Journal of Business Venturing Insights, Elsevier, vol. 18(C).
    5. Dennis Shen & Peng Ding & Jasjeet Sekhon & Bin Yu, 2022. "Same Root Different Leaves: Time Series and Cross-Sectional Methods in Panel Data," Papers 2207.14481, arXiv.org, revised Oct 2022.
    6. Chiara Pederzoli & Grid Thoma & Costanza Torricelli, 2013. "Modelling Credit Risk for Innovative SMEs: the Role of Innovation Measures," Journal of Financial Services Research, Springer;Western Finance Association, vol. 44(1), pages 111-129, August.
    7. César Martinelli & Marco Vega, 2019. "The Economic Legacy of General Velasco: Long-Term Consequences of Interventionism," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 42(84), pages 102-133.
    8. Runst, Petrik & Höhle, David, 2022. "The German eco tax and its impact on CO2 emissions," Energy Policy, Elsevier, vol. 160(C).
    9. Pekka Malo & Juha Eskelinen & Xun Zhou & Timo Kuosmanen, 2024. "Computing Synthetic Controls Using Bilevel Optimization," Computational Economics, Springer;Society for Computational Economics, vol. 64(2), pages 1113-1136, August.
    10. Silvia Marchesi & Tania Masi, 2019. "Sovereign risk after sovereign restructuring. Private and official default," Working Papers 423, University of Milano-Bicocca, Department of Economics, revised Nov 2019.
    11. Dillender, Marcus O. & Heinrich, Carolyn J. & Houseman, Susan N., 2016. "Health insurance reform and part-time work: Evidence from Massachusetts," Labour Economics, Elsevier, vol. 43(C), pages 151-158.
    12. Michał Marcin Kobierecki & Michał Pierzgalski, 2022. "Sports Mega-Events and Economic Growth: A Synthetic Control Approach," Journal of Sports Economics, , vol. 23(5), pages 567-597, June.
    13. Johanna Catherine Maclean & Brendan Saloner, 2018. "Substance Use Treatment Provider Behavior and Healthcare Reform: Evidence from Massachusetts," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 76-101, January.
    14. Diego Zambiasi & Steven Stillman, 2020. "The Pot Rush: Is Legalized Marijuana A Positive Local Amenity?," Economic Inquiry, Western Economic Association International, vol. 58(2), pages 667-679, April.
    15. Gius, Mark, 2020. "Examining the impact of child access prevention laws on youth firearm suicides using the synthetic control method," International Review of Law and Economics, Elsevier, vol. 63(C).
    16. Brodeur, Abel & Cook, Nikolai & Wright, Taylor, 2021. "On the effects of COVID-19 safer-at-home policies on social distancing, car crashes and pollution," Journal of Environmental Economics and Management, Elsevier, vol. 106(C).
    17. Kuosmanen, Timo & Zhou, Xun & Eskelinen, Juha & Malo, Pekka, 2021. "Design Flaw of the Synthetic Control Method," MPRA Paper 106328, University Library of Munich, Germany.
    18. Marc Diederichs & René Glawion & Peter G. Kremsner & Timo Mitze & Gernot Müller & Dominik Papies & Felix Schulz & Klaus Wälde, 2021. "Is large-scale rapid CoV-2 testing a substitute for lockdowns?," Working Papers 2112, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 08 Mar 2021.
    19. Smith, Julia A. & Cordina, Renzo, 2014. "The role of accounting in high-technology investments," The British Accounting Review, Elsevier, vol. 46(3), pages 309-322.
    20. Monastiriotis, Vassilis & Zilic, Ivan, 2020. "The economic effects of political disintegration: Lessons from Serbia and Montenegro," European Journal of Political Economy, Elsevier, vol. 65(C).

    More about this item

    Keywords

    Venture Capital; Innovation; Synthetic Control; Bayesian Structural Time Series;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boj:bojron:ron210312a. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bank of Japan (email available below). General contact details of provider: https://edirc.repec.org/data/bojgvjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.