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The Impact of Venture Capital on Economic Growth

Steven Poelhekke and Benjamin Wache
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Benjamin Wache: CPB Netherlands

No 23-050/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Does venture capital (VC) investment yield economic growth? A large literature studies the effect of VC investments on firm-level activity, but its effects on economic growth are less well understood. We identify the effect of VC investment flows on destination county employment, wages, and establishment creation, using a novel instrument that captures the ‘social connectedness’ of counties to major sources of VC investment. Using detailed data on VC flows from investors to companies, we find a large positive impact of VC investment, suggesting that strong social connections to large venture capital hubs are an important contributor to regional economic growth.

Keywords: Growth; venture capital; social connectedness (search for similar items in EconPapers)
JEL-codes: G24 G41 R11 (search for similar items in EconPapers)
Date: 2023-08-30
New Economics Papers: this item is included in nep-cfn, nep-ent, nep-fdg, nep-geo, nep-gro and nep-tid
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