Venture Capital, Entrepreneurship, and Economic Growth
Top Cited Papers
- 1 February 2011
- journal article
- Published by MIT Press in The Review of Economics and Statistics
- Vol. 93 (1), 338-349
- https://doi.org/10.1162/rest_a_00066
Abstract
Using a panel of U.S. metropolitan areas, we find that increases in the supply of venture capital positively affect firm starts, employment, and aggregate income. Our results remain robust to a variety of specifications, including ones that address endogeneity. The estimated magnitudes imply that venture capital stimulates the creation of more firms than it funds, which appears consistent with two mechanisms: First, would-be entrepreneurs anticipating financing needs more likely start firms when the supply of capital expands. Second, funded companies may transfer know-how to their employees, thereby enabling spin-offs, and may encourage others to become entrepreneurs through demonstration effects. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.Keywords
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