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Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers

Ufuk Akcigit (), Sina Ates (), Josh Lerner (), Richard Townsend () and Yulia Zhestkova ()
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Ufuk Akcigit: University of Chicago - Department of Economics; NBER; CEPR
Sina Ates: Federal Reserve Board of Governors
Josh Lerner: Harvard University - Harvard Business School; NBER
Richard Townsend: University of California at San Diego - Rady School of Management
Yulia Zhestkova: University of Chicago - Department of Economics

No 2020-136, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: The treatment of foreign investors has been a contentious topic in U.S. entrepreneurship policy in recent years. This paper examines foreign corporate investments in Silicon Valley from a theoretical and empirical perspective. We model a setting where such funding may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to spillovers to the overseas firm providing the financing and the nation where it is based. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S. government to raise their costs to deter investments. Using as comprehensive as possible a sample of investments by non-U.S. corporate investors in U.S. start-ups between 1976 and 2015, we find evidence consistent with the presence of knowledge spill-overs to foreign investors.

Keywords: Innovation; foreign direct investment; corporate venture capital (search for similar items in EconPapers)
JEL-codes: G24 O33 O34 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2020
New Economics Papers: this item is included in nep-cse, nep-ent, nep-fdg, nep-ino, nep-sbm and nep-tid
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