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12. Venture Capital and Growth

Sophie Manigart and Harry Sapienza


Subject Business and Management » Entrepreneurship

DOI: 10.1111/b.9780631215738.1999.00016.x


Extract

This chapter reviews the literature on the impact of venture capital investments on economic growth, primarily at the firm level. We focus on new insights gained in the 1990s and on North American and European practices. We examine the impact of formal venture capitalists (VCs) on growth and thus exclude informal or private investors (PIs). It should be noted that although the US venture capital market includes all investment stages and industries typically found in Europe, much of the research on US firms has emphasized the early stage and high-tech aspects of venture capital investing in the United States - what Bygrave and Timmons (1992) term “classic” venture capital. On the other hand, later stage financing and management buy-outs (MBOs) are perhaps the most important areas for venture capital financing in Europe ( Ooghe et al. 1991 ; Wright et al. 1992 ) and are often central in European studies. The formal venture capital industry would not exist if it were not for the willingness of many individuals and institutions to face the dangers of betting significant money and effort for the chance of realizing rapid, sustained growth in capital. The perceived risk of financing a new venture with high potential but without collateral or income stream history often deters banks from providing capital. Further, though potentially willing, individual investors often do not have ... log in or subscribe to read full text

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