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a b s t r a c tThis paper explores whether and how governmental venture capital investors (GVCs) spur invention and innovation in young biotech companies in Europe. To gauge invention we focus on the simple patent stock at the company level, while innovation is proxied by the citation-weighted patent stock. Our findings indicate that GVCs, as stand-alone investors, have no impact on invention and innovation. However, GVCs boost the impact of independent venture capital investors (IVCs) on both invention and innovation. We conclude that GVCs are an ineffective substitute, but an effective complement, of IVCs. We also distinguish between technology-oriented GVCs (TVCs) and development-oriented GVCs (DVCs). We find that DVCs are better at increasing firm's inventions, and that TVCs, combined with IVCs, support innovations.

Manuscript Type Empirical Research Question/Issue We combine the value‐creation and value‐protection views of the board of directors to study the impact of board independence (BI) on the value of the firm at the time of its initial public offering (IPO). Research Findings/Insights We conduct our analysis on a sample of 969 firms that went public in France, Germany, and Italy between 1995 and 2011. We show that BI is a critical factor in the valuation of IPO firms. Our results support both the value‐creation and value‐protection roles of the board of directors. The relative importance of the two roles of the board varies over time, with value‐creation (value‐protection) dominating in IPOs of young (mature) companies. Theoretical/Academic Implications Our theoretical framework combines the agency and resource‐dependence theories. The impact of BI on IPO valuation depends on the importance of the value‐creation and value‐protection roles played by the board. The change in the relative importance of the two roles determines a U‐shaped relationship between BI and firm age. Corporate governance is particularly important for young and innovative firms (where the resource‐dependence theory applies, and governance acts as a value‐creation device), as well as for mature firms and for companies where ownership and control are separated (where the agency theory applies, and governance serves as a value‐protection mechanism for minority shareholders). Practitioner/Policy Implications We show that corporate governance is a significant factor affecting the valuation of an IPO company. The importance of BI varies substantially with the knowledge intensity of the industry, the separation between ownership and control, and the age of the listing company.

We study the investment patterns of different types of venture capital (VC) investors in Europe: independent VC, corporate VC, bank-affiliated VC and governmental VC. We rely on a unique dataset that covers 1,663 first VC investments made by 846 investors in 737 young high-tech entrepreneurial ventures in seven European countries. We compare the relative specialization indices of the different VC investor types across several dimensions that characterize investee companies: industry, age, size, stage of development, distance from the investor and country. Our findings indicate that VC investor types in Europe differ substantially in their investment patterns when compared with one another and that, in terms of investment patterns, governmental VC investors appear to be the most distinct type of VC investor. The investment patterns of different VC investors are stable over time and similar across different European countries. Finally, the investment patterns of the different VC investor types in Europe are significantly different from those observed in the US.

This work studies the effect of venture capital (VC) financing on firms' investments in a longitudinal sample of 379 Italian unlisted new-technology-based firms (NTBFs) observed over the 10-year period from 1994 to 2003. We distinguish the effects of VC financing according to the type of investor: independent VC (IVC) funds and corporate VC (CVC) investors. Previous studies argue that NTBFsare the firms most likely to be financially constrained. The technology-intensive nature of their activity and their lack of a track record increase adverse selection and moral hazard problems. Moreover, most of their assets are firm-specific or intangible and hence cannot be pledged as collateral. In accordance with this view, we show that the investment rate of NTBFs is strongly positively correlated with their current cash flows. We also find that after receiving VC financing, NTBFs increase their investment rate independently of the type of VC investor. However, the investments of CVC-backed firms remain sensitive to shocks in cash flows, whereas IVC-backed firms exhibit a low and statistically not significant investment-cash flow sensitivity that we interpret as a signal of the removal of financial constraints.

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Government venture capital (GVC) funds have been a common policy initiative in European countries to overcome funding gaps in the promotion of early-stage ventures. In this work, we focus on the performance of such government funds. We compare the importance for the firm's development of post-investment, valueadded activities by GVC firms and independent venture capital (IVC) firms. We use a unique data set based on the results of a survey addressed to young high-techVC-backed firms from seven European countries. The survey gauged the importance of the contribution by the first lead investor in a variety of activity areas, as assessed by the investee companies. Attention was paid to potential adverse effects of the post-investment engagement of investors. Using a composite indicator of the value added, we find no statistically significant difference between the two types of investors. However, the profiles of value added differ across investor types, and, in particular, the contributions of IVC funds prove to be significantly higher than those of GVC funds in a number of areas, including the development of the business idea, professionalisation and exit orientation.

We use the theory of organizational ecology to study how governmental venture capital (GVC) affects the investment behavior of private venture capital (PVC). Because of its objectives and dominant competencies, GVC is a unique organizational species that occupies a different niche than and is conceived to establish mutualistic relations with PVC. Accordingly, the greater the presence of GVC in a VC ecosystem, the more PVC investors should be attracted toward GVC's niche. We consider several relevant niche dimensions at the company (age and size), industry (biotechnology) and regional (competitiveness) levels. Our analysis of 1,239 PVC investments in Europe confirms most of our predictions.