Abstract
The purpose of this paper is to provide empirical evidence on the relationship between private equity, innovations, and economic growth in 13 European countries by using quantitative analysis. The objectives of the paper are as follows: description of private equity; examination of the relationship between private equity and economic growth; investigation of the methods used in the related topics; description and testing of the data used in the empirical research; estimation of the empirical model; reporting and interpretation of the results. The systematic, comparative and critical analysis of the scientific literature is used for determining the relationship between private equity, innovation, and economic growth. Further, the data are tested using unit root tests. The panel vector autoregressive model, Granger causality, impulse response, and variance decomposition analyses are applied for short-term causality. The main findings are as follows: granted patents are the most important measure of innovation, which influence private equity and economic growth. However, patents should be considered an input rather than an output of the private equity investment process. Therefore, granted patents attract private equity, and private equity impacts economic growth by commercializing granted patents in the short term.
Highlights
Private equity investments are experiencing growing interest, especially from the young, small and fast growing enterprises which face a financing problem when borrowing money from the banks due to strict bank requirements
The theoretical literature analysis presented in this paper has revealed that each type of relationship among private equity, innovation, and economic growth has its own advocates and the supporting empirical evidence
The empirical literature has indicated that private equity can stimulate economic growth by commercializing technological innovations
Summary
Private equity investments are experiencing growing interest, especially from the young, small and fast growing enterprises which face a financing problem when borrowing money from the banks due to strict bank requirements. Science and technological progress as innovation factors are developing quite rapidly All this promotes the integration of private equity into the economy. Along with this background and a new strategy of the European Union for 2020 (the Innovation Union), the chosen topic deals with the relationship between private equity and economic growth. The purpose of this paper is to provide the empirical evidence of the relationship between private equity, innovations, and economic growth in 13 European countries by using quantitative analysis. The strategy is implemented through the governments, financial institutions, and programs such as COSME1 and HORIZON2, which are directly related to private equity According to this strategy, innovations, productivity, competitiveness and private equity are a new way to affect the economic growth of the European Union. The paper closes with conclusions and suggestions for further research
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