The Role of Venture Capital on Innovation in the Korean Biotechnology Industry

Abstract

Abstract-Venture capital financing is generally considered as the most suitable external financing mode for New technology based SMEs, such as biotech SMEs. However, the way in which venture capital investments influence a firm's innovation performance is not as certain. In this paper, we empirically analyzed the impact of venture capital investments on networks and innovation performance in Korean biotech SMEs. Venture capital investment was positively associated with downstream partnerships, supporting Hypothesis 1-2 (β=0.29, p<0.001). Inter-firm collaborations were positively correlated with a firm's innovation performance, supporting Hypothesis 2 (β=0.18, p<0.10 in upstream partnerships, β=0.61, p<0.01 in downstream partnerships). This study showed the mechanism of venture capital investment influencing innovation by promoting downstream collaborations.

Enhancing innovation through venture capital: lessons from Asia for Nigeria

“…Venture capital influences innovation not only through financial investment, but also through the improvement of human capital, technical competencies, as well as, the provision of infrastructure development and an enabling environment that supports innovation through knowledge diffusion. This has been reinforced by several studies (Bygrave and Timmons 1992;Puri and Hellman, 2000;Kortum and Lerner, 2000;Gomper and Lerner, 2002;Bewonder and Mani, 2002;Rodriguez, 2003;Porter et al, 2004;Snieska and Venckuviene, 2009;Gonzalez-Uribe, 2012;Kelly and Hankook, 2013;Kang and Sohn, 2015;Savaneviciene et al, 2015;Hua et al, 2016). Several nations of the world are leveraging venture capital to enhance their innovative capabilities through building an efficient venture capital industry, because the presence of a deeper and more efficient venture capital industry and more efficient venture capital markets and easier access to external finance encourages investment in innovation (OECD, 2007;UNSTT, 2015).…”