Abstract
Since the 1950s, venture capital (VC) has become a unique, dynamic, and fast-growing financial intermediary. Since the establishment of the world’s first VC firm, American Research and Development, in 1947 in Boston, VC firms have fostered many highly successful companies such as Apple, Google, Microsoft, Intel, Cisco, Amazon, Federal Express, Starbucks, and Staples. VC investments spur firm innovation, cultivate new firms, and promote local economic development. For example, Kortum and Lerner (2000) examine an exogenous policy shift in the United States in 1979 that spurred VC fundraising and find that VC investments indeed caused more firm innovation in the United States. They find that a dollar of VC was 3.1 times more likely to lead to a patent than was a corporate R&D dollar. Samila and Sorenson (2011) find that greater supply of VC is associated with significantly more firm starts, higher employment, and higher aggregate income in American cities.
Published Version
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