The Economic Impact of Venture Capital

This paper attempts to evaluate the macroeconomic impact of venture capital (VC). We test the assumption that VC is similar in several respects to business R&D performed by large firms and therefore contributes to economic growth through two main channels: innovation and absorptive capacity. The quantitative results, based on a panel of 16 OECD countries from 1990 to 2001, show that the social return of VC is significantly higher than the social return of business or public R&D. An increased VC intensity also makes it easier to absorb the knowledge generated by universities and firms. --Venture Capital,Productivity Growth,Innovation,Absorptive Capacity

The Economic Impact of Venture Capital

The objective of this paper is to perform a first evaluation of the macroeconomic impact of venture capital (VC). The main assumption is that VC can be considered as being similar to business R&D performed by large firms. It can therefore contribute to economic growth through two main channels. The first one is innovation, characterized by the introduction of new products, processes or services on the market that directly contribute to improve economic performances. The second one is the development of an absorptive capability. These hypotheses are tested quantitatively with a production function model. The estimates are run over a panel data set of 16 OECD countries from 1990 to 1998. The results show that the accumulation of VC is a significant factor contributing directly to Multi-Factor Productivity (MFP) growth. The social rate of return to VC is twice as high as the social rate of return to business or public R&D. VC has also an indirect impact on MFP in the sense that it improves the output elasticity of R&D. An increased VC intensity makes it easier to absorb the knowledge generated by the universities and firms, and therefore improves aggregate economic performance.Venture Capital, Innovation, Productivity Growth, Absorptive Capability

International R&D Spillovers: A Re-Examination

Coe and Helpman(1995) have measured the extent to which technology spills over between industrialized countries through the particular channel of trade flows. This paper re-examines two particular features of their study. First, we suggest that their functional form of how foreign R&D affects domestic productivity via imports is probably incorrect. We provide an alternative model which turns out to be more accurate, both theoretically and empirically. Second, we take into account two new potential channels of technology transfer: inward FDI and technology sourcing, as proxied by outward FDI. The empirical results show that outward FDI flows and imports flows are two simultaneous channels through which technology is internationally diffused. Inward FDI flows are not a significant channel of technology transfer. The hypothesis of technology sourcing associated with MNEs activities abroad is therefore confirmed while the widespread belief that inward FDI is a major channel of technology transfer is rejected.

The Determinants of Venture Capital: A Panel Data Analysis of 16 OECD Countries

The objective of this paper is to identify the main determinants of venture capital (VC). We develop a theoretical model where three main types of factors affect the demand and supply of VC. These factors are related to macroeconomic conditions, research efforts and technological opportunity, and the entrepreneurial environment. The model is evaluated econometrically with a panel dataset of 16 major OECD countries over the period 1990-1998. The estimates confirm that VC intensity is highly pro-cyclical - it reacts positively and significantly to GDP growth. Short-term (one-year) interest rates have a positive impact on VC intensity, which means that they affect more the demand side of VC (entrepreneurs) than the supply side. Indicators of technological opportunity, such as the growth rate of R&D investment, the stock of knowledge and the number of triadic patents affect positively and significantly the relative level of VC. The factors associated with the entrepreneurial environment also explain a substantial part of cross-country variations in VC intensity. An increase in corporate income tax rate has a negative effect on VC intensity. Labour market rigidities reduce the impact of the GDP growth rate and of the stock of knowledge, whereas a minimum level of entrepreneurship is required in order to have a positive effect of the available stock of knowledge on VC intensity. One important policy implication emerges from these results. It is not by providing money for VC that public decision makers will stimulate VC, but by providing knowledge and improving the entrepreneurial environment.Venture Capital, Technological Opportunity, Entrepreneurship, Labour Market Rigidities

Implementing a Forecasting Methodology for PCT Applications at WIPO

This paper investigates the effectiveness of several methods intending to forecast the number of yearly PCT applications at WIPO. Forecasting exercises have been applied for total PCT applications and for 5 countries accounting for more than 70 per cent of total PCT applications. So far, with the available data, the best 'fit' is obtained either with yearly data on total PCT and the AR(1) method (as opposed to country-specific estimations that have been subsequently aggregated for total PCT previsions) or with panel data estimates that include economic variables (GDP and R&D) for 5 countries. The forecasts of total PCT applications in 2002 range between 120 and 127 thousands units and between 140 and 150 thousands units in 2003. Several avenues for improvement are suggested, including an improved linearization of the basic series (other than logarithmic transformation), the use of sector specific data (as opposed to country-specific), and the use of national priority applications for the prevision of the forthcoming declining growth period (or 'stationary' period).

Organizational Competencies and Innovation Performances: The Case of Large Firms in Belgium

The objective of this paper is to assess whether large firms' organizational competencies affect their innovation performances. About 40 organizational sub-competencies are defined and measured through an original survey questionnaire answered by 148 large firms in Belgium. The sub-competencies are grouped into seven broad organizational competencies associated with the inovation process. For each broad competence a principal component analysis is run to illustrate whether the sub-competencies are related to three innovation performance indicators, including R&D intensity, the number of patents and the share of sales accounted for by innovative products and processes. The empirical results show that the output related innovation performance indicators (innovative output and the number of patents) are closely related with most organizational competencies, whereas R&D intensity is only correlated with two competencies (developing an innovation culture and using internal funding for innovation). Innovation performance is not only a function of the investment devoted to the creation of new products, processes or services, but also a function of the organizational process underlying innovative activities.Organizational competencies, innovation performance, R&D, principal component analysis

Strategic Management of Innovation and Patenting Performances

This paper intends to contribute to the literature on the determinants of firms' patenting performances. In this respect it puts forward several new hypotheses related to the relationship between the strategic management of innovation and patenting performances. It relies on an original survey questionnaire on innovation competencies, innovation strategy and the perceived innovation barriers of 148 large firms in Belgium. The econometric results confirm several hypotheses already tested in the literature, including the positive impact of firm size, market concentration and technological opportunity. In addition, innovation strategy (e.g., product vs. process innovation; university partnership; the share of basic and applied research in total R&D), innovation competencies (e.g., ideas storage and codification; use of academic information), and barriers perception (e.g., internal barriers; risk/cost barriers) are all significant determinants of patenting performances.Innovation competencies, Innovation performances, Barriers to innovation, Patents

The Determinants of Venture Capital: Additional Evidence

This paper attempts to identify and evaluate the main determinants of venture capital (VC). We develop a theoretical model where macroeconomic conditions, technological opportunity, and the entrepreneurial environment affect the demand and supply of VC. The quantitative results, based on a panel dataset of 16 OECD countries from 1990 to 2000, show that VC intensity is pro-cyclical. Interest rates affect more the demand side of VC (entrepreneurs) than the supply side. Indicators of technological opportunity, such as the stock of knowledge and the number of triadic patents affect positively and significantly the relative level of VC. Labour market rigidities reduce the impact of the GDP growth rate and of the stock of knowledge, whereas a minimum level of entrepreneurship is required in order to have a positive effect of the available stock of knowledge on VC intensity. --Venture Capital,Technological Opportuniy,Entrepreneurship,Labour Market Regidities

The Sources of Knowledge and the Value of Academic Patents

This paper aims at contributing to the literature on the determinants of patent value in two respects. It first puts forward new potential determinants of patent value which are mainly related to the identification of the institutional sources of knowledge and the geographical scope of patenting strategy. Second, it aims at validating the traditional and new determinants of patent value with academic patents. The empirical analysis focuses on 208 patent families applied by six main Belgian Universities. The patent value is approximated by the number of forward patent citations. The estimates confirm the role of most traditional determinants of patent value (e.g., backward citation and family size). Further, the new indicators underline the importance of identifying the institutional sources of knowledge. They provide a more in-depth view on the way non patent citations, backward patent citations, co-assignees, and the geographical scope for protection determine patent value. Policy implications emerge from these results, such as the benefit of local and international collaboration between public research organisations and the need to convince academic researchers with a high scientific profile in terms of publications to crystallize their tacit knowledge into high value academic patents.Patent value, patent indicators, knowledge sources

Measuring Innovation Competencies and Performances: A Survey of Large Firms in Belgium

Based on original survey data, this paper provides evidence on firms' innovation competencies and performances in Belgium. The relationship with firm size and technological opportunity is systematically evaluated. The first conclusion is that firms recognize the strategic importance of innovation but fail to undertake the "practical" steps to develop it. Large firms globally better master innovation competencies. However, small firms allocate the largest share of profits to finance innovative projects. In terms of performances, small and large firms, as opposed to medium ones, show the best results for their R&D investments and patent applications. It is also shown that the share of turnover due to incremental innovation is the highest within small firms, while technological breakthroughs are more important within large firms. There is a positive relation between technological opportunity and innovation competencies, R&D investments and patent applications. Services firms have relatively weak records on all innovation indicators but perform well concerning human resources, educational activities and the management of market information. Foreign firms invest significantly less in R&D than local firms. Finally costs- and risks-related barriers to innovation are the most important to all firms, whatever the size and technological opportunity.Innovation competencies, Innovation performances, Barriers to innovation, Survey data