Cross-regional venture capital flows in Europe: The role of entrepreneurial ecosystems and proximity

Ramon Compano (), Csaba Johanyak, Giuseppina Testa, Ni Zhen, Giuseppina Testa and Alexander Tuebke ()
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Ramon Compano: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en
Alexander Tuebke: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en

No 2026-01, JRC Working Papers on Corporate R&D and Innovation from Joint Research Centre

Abstract: This paper examines whether, and under which conditions, regional entrepreneurial ecosystems mitigate spatial frictions in cross-regional venture capital (VC) investments. Using a dyadic panel of VC flows across 267 European NUTS-2 regions over 2008-2022, we estimate gravity-style regressions with high-dimensional fixed effects, distinguishing investments by stage and investor origin. Our results show that spatial frictions, particularly geographic and economic distance, remain important determinants of VC allocation. At the same time, regions with stronger entrepreneurial ecosystems attract higher VC inflows and exhibit lower sensitivity to institutional and structural differences. Differences across investor origins suggest that ecosystem legibility is most valuable when institutional uncertainty is high, such as for cross-border investors.

Date: 2026-04
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Persistent link: https://EconPapers.repec.org/RePEc:ipt:wpaper:202601

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