Abstract
Based on the literature on the Diversity of Capitalism (DoC) and Legal Origin (LO), this paper examines the role of institutional configurations in the uneven development of Private Equity (PE) in 18 European countries. The paper shows that developed stock markets, the ability of limited partners (insurance companies) to invest in LBO funds and low employment protection are more important determinants than investor protection in the case of LBO investments. However, VC investments are found to be positively associated with investor protection but also with developed stock markets and favourable tax rates for managers. R&D tax incentives for investee companies are found to have a negative impact on VC investments, which are nonetheless promoted by public R&D expenditures. Even if national institutional configurations matter in explaining differences, as emphasised by LO and DoC, we observe a common trend in PE development and financialisation.
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