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The Role of Venture Capital in Promoting High Tech and Science-Based Growth

Joyce Tait   Alessandro Rosiello

Affiliated staff:   Julian Sulej   Shefaly Yogendra

Funding: EU PRIME Network of Excellence

September 1 2004 – December 1 2005

Background

Changes in the organisation of science-based Industries are increasingly based on the entry and development of new high tech firms. Venture capital (VC) is considered here as a specific industry whose purpose is to contribute to the technological and financial choices of innovating firms.

It is seen as a component of an innovation system whose interactions go beyond financial support so that venture capitalists are part of the selection environment that allow economic systems to change with regard to innovation and growth. This selection function is termed intermediation. Innogen is a partner in this project along with researchers from France, Finland, Italy and Israel.

Aims and objectives

  • Are there institutional characteristics of the respective national innovation systems that influence the development of the VC industry in each country?
  • To what extent is the development of VC industry sector-specific: the lessons from two industrial areas (ICT and Biotechnology)
  • Are some forms of VC intermediation more prone than others to internationalise ? Can we speak of the competitiveness of VC industries?

Research methods

  • Desk based research on ‘grey’ literature and published papers; analysis of existing databases on the VC industry.
  • Quantitative data collection: a comprehensive data set has been gathered comprising information on any deal in the pharma-ceutical and biotechnology sectors for the 1996-2006 period.
  • Qualitative data collection: 20 in-depth interviews have been conducted with venture capitalists and the directors of dedicated biotechnology companies in Cambridge and Scotland.
  • Design of a framework for identifying policy implications and developing policy lessons for the countries participating in the project.
  • Development of a further proposal for EC funding through the PRIME Network.

Key findings

  • Description of VC investment patterns in terms of incentives, targets, and value-added provided to investees
  • Quantitative evidence as regards the concentration of VC investments in knowledge intensive areas in the UK
  • Qualitative and Quantitative data have been coupled to explain the relationship between the provision of added-value and the regionalisation of VC investment

Publications

Rosiello, A, Parris, S, and Massimiliano, C., Venture Capital as a New Form of Intermediation: Implication for the Emergence of Bio-Clusters in the UK. This paper will be presented at the final PRIME VC FUN dissemination workshop in Rome, December 2007.

Rosiello, A, Teubal, M, and Avnimelech, G., Towards the Framing of Venture Capital Policies in Europe. The paper will be presented at the Atlanta Conference on Science, Technology, and Innovation Policy 2007.

Further information

For further information contact Alessandro Rosiello, Alessandro.Rosiello@ed.ac.uk