Venture Capital, Entrepreneurship, and Economic Growth
The Review of Economics and Statistics
2011
open access
Using a panel of U.S. metropolitan areas, we find that increases in the supply of venture capital positively affect firm starts, employment, and aggregate income. Our results remain robust to a variety of specifications, including ones that address endogeneity. The estimated magnitudes imply that venture capital stimulates the creation of more firms than it funds, which appears consistent with two mechanisms: First, would-be entrepreneurs anticipating financing needs more likely start firms when the supply of capital expands. Second, funded companies may transfer know-how to their employees, thereby enabling spin-offs, and may encourage others to become entrepreneurs through demonstration effects.
- DOI
- 10.1162/rest_a_00066
- Volume
- 93 (1)
- Pages
- 338-349
- Language
- en
- Export
- BibTeX
- Sources
- crossref openalex