Venture capital and high-tech start-ups in Europe: a systematic review of the empirical evidence

Abstract

ABSTRACT Empirical literature on venture capital (VC) and VC-related policies posit that VC can play a major role in helping high-tech start-ups grow and innovate. Motivated by the VC policies recently adopted in Europe and by the heterogeneity of the VC effects across countries and regions, we assess this hypothesis in Europe. Using systematic literature review methods, we summarize the results of 34 firm-level studies published between 2000 and 2023 that estimate value-added effects of VC on funded firms in 17 European countries. The results show a clear preponderance of positive effects on firm expansion and investment. The evidence on the effects on innovation and productivity is more limited and mixed. Regarding the channels of these effects, there is considerable evidence that VC reduces credit constraints of funded firms and limited, but supportive, evidence that VC reduces other barriers to growth. The type of VC emerges as a key moderating factor. Private, independent VC tends to have the largest effects. Government VC tends to have lower, but positive, effects and it often complements private VC. Based on the results of the review and on the current landscape of VC in Europe, we provide recommendations for policy and future research.