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The European venture capital landscape: an EIF perspective. Volume V: The economic impact of VC investments supported by the EIF

Elitsa Pavlova and Simone Signore

No 2019/55, EIF Working Paper Series from European Investment Fund (EIF)

Abstract: This paper examines the impact of venture capital (VC) investments supported by the EIF on the financial growth and performance of young and innovative firms. Using a novel dataset covering European start-ups supported by VC in the years 2007 to 2014, we generate a counterfactual group of non-VCbacked firms through a combination of exact and propensity score matching. To offset the relatively limited set of observables allowed by our data, we estimate treatment propensity using a series of innovative measures based on machine learning, network theory, and satellite imagery analysis. Our results document the positive effects of EIF-supported VC investments on start-up performance, as measured through various financial indicators (e.g. assets, revenue, employment). We find that VC financing enables start-ups to prioritise long-term growth, trading off short- to medium-term profitability if necessary. Overall, our work provides meaningful evidence towards the positive effects of EIF-supported VC investment on the financial growth of young and innovative businesses in Europe.

Keywords: EIF; venture capital; public intervention; real effects; start-ups; machine learning; geospatial analysis; network theory (search for similar items in EconPapers)
JEL-codes: G24 L25 M13 O38 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-big, nep-cfn, nep-cse, nep-eec, nep-ent and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:eifwps:201955

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