The Determinants of Venture Capital in Europe — Evidence Across Countries

Abstract

This article analyzes the determinants of the European venture capital market, extending the equilibrium model from Jeng and Wells (2000). Our empirical model includes many of the determinants already tested in previous studies. In addition, we test whether the unemployment rate, the trade sale divestment and the price/book ratio are important factors in explaining venture capital. We use aggregated data from the European venture capital market as well as macroeconomic data, to estimate panel data models, with fixed and random effects. The random effects models revealed to be the most adequate. Our results confirm the importance of some of the already known factors and show that the unemployment rate and trade sale divestments are important determinants in the European venture capital market.

Institutional Determinants of Venture Capital Activity: An Empirically Driven Literature Review and a Research Agenda

“…He finds that stock market capitalization has a significant positive impact on early‐stage VC investments. Similar results are obtained by most of the studies, even if also, in this case, there are some exceptions (see Bonini and Alkan, ; Félix et al ., , which seem nevertheless to be contingent on the specific variables used to proxy stock market capitalization).…”

“…Similar findings are obtained by Schertler (), Romain and van Pottelsberghe (), Schröder (), Félix et al . (), even if some exceptions do exist in this respect, for example Bonin and Alkan ().…”

Institutional Seed Financing, Angel Financing, and Crowdfunding of Entrepreneurial Ventures: A Literature Review

“…Balboa and Martí, 2001;Cumming et al, 2010;Félix et al, 2007;Groh and von Liechtenstein, 2009;Nahata et al, 2015;Romain and van Pottelsberghe de la Potterie, 2004). Another more recent study on cross-border determinants was conducted by Moore et al (2015) who identify that normative and cultural-cognitive distinctions between countries can lead to less cross-border VC activity; where normative differences are those of social norms, values, and beliefs and cultural-cognitive differences between the knowledge and understanding of people between countries.…”

Creditor Protection Law Effects on Venture Capital Investment in Africa:Country-Level Evidence

“…It inf luences potential portfolio companies' choices to enter a market by opting for the financing and active management offered by GP firms rather than pure debt financing (Romain and Potterie [2003] and Félix, Gulamhussen, and Pires [2013]). 25 Finally is the number of scientific and technical journal articles, per 1,000 people, published in a country in the fields of physics, biology, chemistry, mathematics, clinical medicine, biomedical research, engineering and technology, and earth and space sciences.…”