Abstract - The effect of venture capital on start-ups' innovation strategies

The role of venture capitalists (VC) as active investors has recently been uncovered by several studies. While some focus on how VC affects commercialization strategies, this paper is the first to investigate how VC affects a variety of strategies at the innovation stage. Our sample of companies is the result of matching data on VC-backed Dutch companies with company-level data from 3 Dutch Community Innovation Surveys covering the period 1998-2004. Our preliminary results suggest that the mere presence of a VC does not by itself affect innovation strategies. However certain types of VCs do affect them. In particular we find that independent VCs increase the likelihood of cooperating with customers, suppliers and also with competitors. We also find that foreign VCs, especially those based in the US, increase the probability of relying on others during the innovation process and in particular of cooperating with foreigners. Finally our results suggest that companies financed by VCs that specialize in early stage investment, choose more innovative products are and more successful in introducing innovations.

Maria Fabiana Penas
Tilburg University
15.May 2007

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