The Reallocation Effects of COVID-19: Evidence from Venture Capital Investments around the World

Andrea Bellucci (), Alexander Borisov (), Gianluca Gucciardi and Alberto Zazzaro ()
Additional contact information
Andrea Bellucci: European Commission - Joint Research Centre and MoFiR
Alexander Borisov: University of Cincinnati, USA and MoFiR, Italy

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We examine possible reallocation effects on venture capital (VC) investment due to the spread of COVID-19 around the globe. Exploiting the staggered nature of the pandemic and transaction-level data, we empirically document a shift of venture capital towards deals in pandemic-related categories. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such categories. We further highlight several heterogenous effects related to the experience of VC investors, their organizational form, and country of origin. Our results underscore the link between the spread of the pandemic and the functioning of the VC market around the world. The probabilities of consumption drops and increased saving are positively associated to fear of contagion, particularly while shopping, traveling and eating out. Income uncertainty, measured by the probability of job loss, also contributes to explain the increase in saving and the drop in consumption. Our findings suggest that fear of contagion and income uncertainty limits the effectiveness of policies aimed at stimulating consumption during the pandemic.

Keywords: Venture Capital; Investment; COVID-19; Healthcare; Pandemic. (search for similar items in EconPapers)
JEL-codes: D81 E22 E44 F21 G24 (search for similar items in EconPapers)
Date: 2021-01-31
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The reallocation effects of COVID-19: Evidence from venture capital investments around the world (2023)
Working Paper: The Reallocation Effects of COVID-19: Evidence from Venture Capital Investments around the World (2022)
Working Paper: The Reallocation Effects of COVID-19: Evidence from Venture Capital Investments around the World (2020)
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