Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn

Josh Lerner and Ramana Nanda

Journal of Economic Perspectives, 2020, vol. 34, issue 3, 237-61

Abstract: Venture capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the venture model. At the same time, venture capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional venture capital investors; 2) the relatively small number of venture capital investors who hold and shape the direction of a substantial fraction of capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by venture capital firms. While our ability to assess the social welfare impact of venture capital remains nascent, we hope that this article will stimulate discussion of and research into these questions.

JEL-codes: D22 G24 G32 O31 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (72)

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Working Paper: Venture Capital’s Role in Financing Innovation: What We Know and How Much We Still Need to Learn (2020)
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DOI: 10.1257/jep.34.3.237

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