Abstract
This paper aims at providing novel evidence about the geographical concentration of venture capital (VC) activity in seven European countries. Drawing upon a unique dataset, VICO 2.0, we describe the geographical distribution of VC investments and VC-backed technology-intensive start-ups and analyse the regional and country-level factors associated to the regional concentration in VC activity. Results from econometric estimates suggest that regional VC activity is positively associated to the level of regional knowledge intensity, the level of regional human capital, the local supply of VC investors and a more favourable country’s legal and institutional environment.
Highlights
There is quite unanimous agreement among scholars and policy makers that young firms operating in technology intensive industries contribute substantially to a country’s international competiveness, as they are key engines of innovation, job creation and economic growth (e.g., Audretsch and Keilbach 2004; 2005; Criscuolo et al 2014).One of the main challenges that technology-intensive start-ups face is obtaining the funding they need in the early stage of their lives to develop their businesses and to scale up (European Commission 2016)
As to regional level variables, we find a positive association between regional knowledge intensity and the number of venture capital (VC) investments
We analysed the determinants of the geographical concentration of VC activity, giving for the first time a more comprehensive overview of the European VC industry
Summary
There is quite unanimous agreement among scholars and policy makers that young firms operating in technology intensive industries (hereafter: technology-intensive start-ups) contribute substantially to a country’s international competiveness, as they are key engines of innovation, job creation and economic growth (e.g., Audretsch and Keilbach 2004; 2005; Criscuolo et al 2014).One of the main challenges that technology-intensive start-ups face is obtaining the funding they need in the early stage of their lives to develop their businesses and to scale up (European Commission 2016). The information asymmetries associated to the high technological content of these entrepreneurial ventures, the lack of a track record, and the low and mostly intangible value of their assets, which can hardly be pledged as collateral, hinder traditional financing forms (Berger and Udell 1990; Carpenter and Petersen 2002). Specialized financial intermediaries such as Venture Capital (hereafter: VC) investors are an important source of financing for technology-intensive statups. Other studies confirm similar patterns of agglomeration around the main urban centers in U.K. and China (e.g., Mason and Harrison 2002; Pan et al 2016)
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