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1、Chapter 14 venture capital and innovation,Members: 范睿玺070715755 张祺越070713352 李红霞070713329 李彬欣070715005 张静梅070711432,Introduction,The hypothesis : Venture Capital ? Innovation spillover effects Economic Growth,Definition of,Theoretical work-smart money Empirical work-financial intermediaries that pro
2、vide young firms with equity capital.,Venture Capital Value-Added and Conflicts,Scope of Theoretical Work Scope of Empirical Work,Definition of “Innovations”,It is generally accepted that innovation is “the introduction of something new” A study finds that innovation per employee is higher for small
3、 firms than for large firms.,Innovation suffers from two issues:,limited data. difference in their qualities and their economic impacts,Three measures of innovation,Patents Productivity growth Research and development (R&D) expenditures,Patents( a direct measure),Patents are subjected to two issues:
4、 (1)Patented inventions are heterogeneous in quality (2)Not all innovations are patented,Productivity growth( a direct measure),Productivity is the ratio of output and input Productivity growth quantifies the degree of each innovation . Labor productivity growth Total factor productivity (TFP) growt
5、h,R&D expenditures (a direct measure),R&D expenditures are expressed by dollar amount and allow us to translate innovations into economic values easily. The scale of innovation depends not only on how much R&D expenditures are spent but also on how efficiently they are spent.,Quick Facts on Venture
6、Capital and Innovation,The statistical facts from the time-series and cross-sectional data about VC investment and the three measures of innovation -patent, labor productivity growth, and TFP growth in the US manufacturing industry -are summarized below.,Exhibit 14.2 Investment and Patenting in the
7、U.S. Manufacturing Industries,Exhibit 14.3 VC Investment and Productivity Growth in U.S. Manufacturing Industries,Exhibit 14.4 Innovation Measures and VC Investment by Industry ( Time Average),Quick Facts on Venture Capital and Innovation,In summary ,a positive association between venture capital an
8、d innovation is almost absent in the U.S. time series data. This simple observation should alert policy makers to be careful in using venture capital as a tool to stimulate local innovation. The positive association between venture capital and innovation is strong in the cross-sectional data. Nevert
9、heless, we are also have to be careful in interpreting causality.,Venture capital and innovation theoretical linkages,The features of the innovation make the following factors are important for financing innovations. Patient capital Value-adding investors Investor with technical expertise Less regul
10、ated institutions,Patient capital,Patient capital is available when the investors do not need liquidity for a long time or when initial investors can obtain liquidity by selling their financial claims easily. VC funds which has a 10-year life with the in option to extend 2 more years should have bee
11、n superior in financing innovations ,however, the venture capitalists would like to see return earlier. Therefore, VC funds have limitation in playing a role of patient capital.,Value-adding investors,Value-adding investors are those who provide financial resources to their portfolio and other types
12、 of services to enhance the value of the firms Technical minds lack a sense of cost and of the viewpoint of perspective customers of the product, so they need business expertise. Venture capitalist can assist the new firms innovation in several ways. Such as obtaining additional financing , recruiti
13、ng a management team and identifying customers and suppliers.,Investors with Technical Expertise,Investors with technical expertise are also important for financing innovation,Information problems such as moral hazard and asymmetric information are acute for new innovation vetures,Investors with tec
14、hnical expertise understand the technical milestones at various stages that new ventures have to hit They are well aware of technical viabilities and financial prospects of the ventures,Innovative ideas often turn out to be unviable,only assets in the venture-intellectual property Less than 29% typi
15、cal VCs have advanced science degrees,Why less regulated financial institution are more desirable for financing innovation,They want be as secretive as possible instead of being exposed to public scrutiny Flexible contracting is particularly important for new innovative ventures,summary,More innovation when the supply of VC is plentiful,Thanks for your attentions !,
