IDEAS home Printed from https://ideas.repec.org/p/zbw/zewdip/895.html
   My bibliography  Save this paper

The Impact of Venture Capital on Firm Growth: An Empirical Investigation

Author

Listed:
  • Engel, Dirk

Abstract

The financial and non-financial involvement of venture capitalists is supposed to be positively correlated with firm performance. This paper deals with the evaluation of the impact of venture capitalists on employment growth of new founded firms. Differences between high-tech and low-tech industries as well as the impact of other investors are analyzed. The estimation results show that surviving venture-backed firms realize higher growth rates compared to surviving non-venture-backed firms. Moreover, venture capitalists are more able to push the firms to a faster and higher employment growth than other investors.

Suggested Citation

  • Engel, Dirk, 2002. "The Impact of Venture Capital on Firm Growth: An Empirical Investigation," ZEW Discussion Papers 02-02, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:895
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/24804/1/dp0202.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    2. Evans, David S, 1987. "The Relationship between Firm Growth, Size, and Age: Estimates for 100 Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 567-581, June.
    3. John Sutton, 1997. "Gibrat's Legacy," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 40-59, March.
    4. Almus, Matthias & Engel, Dirk & Prantl, Susanne, 2000. "The Mannheim Foundation Panels of the Centre for European Economic Research (ZEW)," ZEW Dokumentationen 00-02, ZEW - Leibniz Centre for European Economic Research.
    5. Binks, Martin R & Ennew, Christine T, 1996. "Growing Firms and the Credit Constraint," Small Business Economics, Springer, vol. 8(1), pages 17-25, February.
    6. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    7. Jeng, Leslie A. & Wells, Philippe C., 2000. "The determinants of venture capital funding: evidence across countries," Journal of Corporate Finance, Elsevier, vol. 6(3), pages 241-289, September.
    8. Tyzoon T. Tyebjee & Albert V. Bruno, 1984. "A Model of Venture Capitalist Investment Activity," Management Science, INFORMS, vol. 30(9), pages 1051-1066, September.
    9. Acs,Zoltan J. & Carlsson,Bo & Karlsson,Charlie (ed.), 1999. "Entrepreneurship, Small and Medium-Sized Enterprises and the Macroeconomy," Cambridge Books, Cambridge University Press, number 9780521621052, January.
    10. Goux, Dominique & Maurin, Eric, 2000. "Returns to firm-provided training: evidence from French worker-firm matched data1," Labour Economics, Elsevier, vol. 7(1), pages 1-19, January.
    11. Almus, Matthias, 2001. "Evaluating the impact of public start-up assistance: results from an econometric approach," ZEW Discussion Papers 01-23, ZEW - Leibniz Centre for European Economic Research.
    12. Georg Gebhardt & Klaus M. Schmidt, 2002. "Der Markt für Venture Capital: Anreizprobleme, Governance Strukturen und staatliche Interventionen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(3), pages 235-255, August.
    13. Amit, Raphael & Brander, James & Zott, Christoph, 1998. "Why do venture capital firms exist? theory and canadian evidence," Journal of Business Venturing, Elsevier, vol. 13(6), pages 441-466, November.
    14. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-670, May.
    15. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097, Elsevier.
    16. P. Hart, 2000. "Theories of Firms' Growth and the Generation of Jobs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(3), pages 229-248, November.
    17. Engel Dirk, 2003. "Höheres Beschäftigungswachstum durch Venture Capital? / Does Venture Capital Affect New Firms' Growth?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(1), pages 1-22, February.
    18. Timmons, Jeffry A. & Bygrave, William D., 1986. "Venture capital's role in financing innovation for economic growth," Journal of Business Venturing, Elsevier, vol. 1(2), pages 161-176.
    19. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    20. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    21. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    22. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc.
    23. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-694, July.
    24. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January.
    25. Reize, Frank, 2001. "FIML estimation of a bivariate probit selection rule: an application on firm growth and subsidisation," ZEW Discussion Papers 01-13, ZEW - Leibniz Centre for European Economic Research.
    26. Bürgel, Oliver & Fier, Andreas & Licht, Georg & Murray, Gordon, 2000. "Internationalisation of high-tech start-ups and fast growth-evidence for UK and Germany," ZEW Discussion Papers 00-35, ZEW - Leibniz Centre for European Economic Research.
    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. Engel, Dirk, 2001. "Höheres Beschäftigungswachstum durch Venture Capital?," ZEW Discussion Papers 01-34, ZEW - Leibniz Centre for European Economic Research.
    2. Engel, Dirk & Keilbach, Max, 2007. "Firm-level implications of early stage venture capital investment -- An empirical investigation," Journal of Empirical Finance, Elsevier, vol. 14(2), pages 150-167, March.
    3. Colombo, Massimo G. & Grilli, Luca, 2010. "On growth drivers of high-tech start-ups: Exploring the role of founders' human capital and venture capital," Journal of Business Venturing, Elsevier, vol. 25(6), pages 610-626, November.
    4. Almus, Matthias, 2001. "Das Wachstum junger Unternehmen: Eine Bestandsaufnahme 10 Jahre nach der Wiedervereinigung," ZEW Discussion Papers 01-40, ZEW - Leibniz Centre for European Economic Research.
    5. Engel Dirk, 2003. "Höheres Beschäftigungswachstum durch Venture Capital? / Does Venture Capital Affect New Firms' Growth?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(1), pages 1-22, February.
    6. Stefano Caselli & Stefano Gatti & Francesco Perrini, 2009. "Are Venture Capitalists a Catalyst for Innovation?," European Financial Management, European Financial Management Association, vol. 15(1), pages 92-111, January.
    7. Heneric, Oliver & Engel, Dirk & Champenois, Claire, 2004. "The Birth of German Biotechnology Industry - Did Venture Capital run the show?," RWI Discussion Papers 16, RWI - Leibniz-Institut für Wirtschaftsforschung.
    8. Bertoni, Fabio & Colombo, Massimo G. & Grilli, Luca, 2011. "Venture capital financing and the growth of high-tech start-ups: Disentangling treatment from selection effects," Research Policy, Elsevier, vol. 40(7), pages 1028-1043, September.
    9. Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2013. "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 173-189.
    10. Johannes Wallmeroth & Peter Wirtz & Alexander Peter Groh, 2017. "Institutional Seed Financing, Angel Financing, and Crowdfunding of Entrepreneurial Ventures: A Literature Review," Working Papers hal-01527999, HAL.
    11. Canarella, Giorgio & Miller, Stephen M., 2018. "The determinants of growth in the U.S. information and communication technology (ICT) industry: A firm-level analysis," Economic Modelling, Elsevier, vol. 70(C), pages 259-271.
    12. Jens Burchardt & Ulrich Hommel & Dzidziso Samuel Kamuriwo & Carolina Billitteri, 2016. "Venture Capital Contracting in Theory and Practice: Implications for Entrepreneurship Research," Entrepreneurship Theory and Practice, , vol. 40(1), pages 25-48, January.
    13. Bertoni, Fabio & Martí, Jose & Reverte, Carmelo, 2019. "The impact of government-supported participative loans on the growth of entrepreneurial ventures," Research Policy, Elsevier, vol. 48(1), pages 371-384.
    14. Annalisa Croce & Jose Martí & Carmelo Reverte, 2019. "The role of private versus governmental venture capital in fostering job creation during the crisis," Small Business Economics, Springer, vol. 53(4), pages 879-900, December.
    15. Bozkaya, Ant & Romain, Astrid & Pottelsberghe de la Potterie, Bruno van, 2003. "Surveying Technology-Based Small Firms: A Perspective From Belgium," IIR Working Paper 03-23, Institute of Innovation Research, Hitotsubashi University.
    16. Douglas Cumming, 2006. "Adverse Selection and Capital Structure: Evidence from Venture Capital," Entrepreneurship Theory and Practice, , vol. 30(2), pages 155-183, March.
    17. Kwanghui Lim & Brian Cu, 2012. "The effects of social networks and contractual characteristics on the relationship between venture capitalists and entrepreneurs," Asia Pacific Journal of Management, Springer, vol. 29(3), pages 573-596, September.
    18. Croce, Annalisa & Martí, José & Murtinu, Samuele, 2013. "The impact of venture capital on the productivity growth of European entrepreneurial firms: ‘Screening’ or ‘value added’ effect?," Journal of Business Venturing, Elsevier, vol. 28(4), pages 489-510.
    19. Almus, Matthias, 2001. "Evaluating the impact of public start-up assistance: results from an econometric approach," ZEW Discussion Papers 01-23, ZEW - Leibniz Centre for European Economic Research.
    20. Engel, Dirk, 2002. "Zur Rolle von Beteiligungskapitalgebern in ihren Portfoliounternehmen: Eine ökonometrische Analyse," ZEW Discussion Papers 02-58, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    Venture Capital; Start-ups; Employment Growth; Selection Bias; Evaluation;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

    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:zbw:zewdip:895. 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: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zemande.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.