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The patterns of venture capital investment in the UK bio-healthcare sector: the role of proximity, cumulative learning and specialisation

Rosiello, A   Parris, S

Venture Capital, An International Journal of Entrepreneurial Finance   11 (3) 185-211

July 2009   (Version of record first published June 2009)

http://www.tandfonline.com/doi/abs/10.1080/13691060902973016

This paper focuses on the patterns of venture capital (VC) investment in dedicated biotech firms (DBFs) in the therapeutic and diagnostic sectors (bio-healthcare). We use a database of 655 UK bio-healthcare deals to map the geographical flows of VC investment and measure the co-location of investors and DBFs. Then, using 20 face-to-face interviews with venture capitalists (VCs) and DBF firms in Cambridge and Scotland, we study the strategic motives underlying the co-location of investors and investee companies and reflect on the catalytic role VCs play in context of the Scottish and Cambridge bio-clusters.

From the viewpoint of VC-related policies, we find that our study is more in line with arguments stressing the attractive power of 'investor-ready' opportunities (Mason and Harrison 2003) than supply-side approaches that take for granted VC presence at the core of high-tech clusters. In line with Avnimelech, Rosiello, and Teubal (2008), we propose that VC policy should be consistent with the wider strategic objectives of innovation and technology policy.