Venture Capital and Growth

This chapter reviews the literature on the impact of venture capital investments on economic growth, primarily at the firm level. We focus on new insights gained in the 1990s and on North American and European practices. We examine the impact of formal venture capitalists (VCs) on growth and thus exclude informal or private investors (PIs). It should be noted that although the US venture capital market includes all investment stages and industries typically found in Europe, much of the research on US firms has emphasized the early stage and high-tech aspects of venture capital investing in the United States - what Bygrave and Timmons term "classic" venture capital. On the other hand, later stage financing and management buy-outs (MBOs) are perhaps the most important areas for venture capital financing in Europe and are often central in European studies.