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The Survival of Venture Capital Backed Companies: An Analysis of the French Case

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  • Sophie Pommet

Abstract

We analyze the impact of venture capital on firm performance; more precisely, we investigate whether venture capital adds value to innovative French companies in terms of increasing their survival time. To this end, we use a hand-collected data set based on a sample of 139 French companies that went public at the \Nouveau Marché" between 1996 and 2002 to compare the survival rates of venture capital backed and non-venture capital backed companies. We develop two sets of econometric models to evaluate the factors that affect the fate of French initial public offerings. First, we estimate a discrete time duration model to explain the probability of exit. Second, we apply a competing risk model to account for heterogeneity in firm exit (liquidation versus merger/acquisition). Contrary to common wisdom, the estimates show that venture capital backed companies have a lower survival rate than non-venture capital backed companies and have a higher probability of being liquidated than other firms. Our results are comparable to those obtained in previous studies on Germany and Belgium which show that receiving venture capital does not improve firm survival.

Suggested Citation

  • Sophie Pommet, 2012. "The Survival of Venture Capital Backed Companies: An Analysis of the French Case," GREDEG Working Papers 2012-14, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2012-14
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    References listed on IDEAS

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    1. Bonini, Stefano & Capizzi, Vincenzo & Zocchi, Paola, 2019. "The performance of angel-backed companies," Journal of Banking & Finance, Elsevier, vol. 100(C), pages 328-345.

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    More about this item

    Keywords

    venture capital; survival; innovation; France;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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