Worldwide venture capital, intellectual property rights, and innovation

Abstract

This study, based on the historical data of venture capital (VC) investment and patenting for 99 countries and 83 industries, explores the effects of VC investment on firms' innovation in different intellectual property rights (IPR) environments worldwide, utilizing large data sets and various empirical models. Our negative binomial and panel data analysis presents the significant and positive impacts of VC investment and IPR parameters on firms' innovation, controlling for cultural, regulatory, and economic and market conditions of the business environment. However, VC investment is more effective in weaker IPR environments. This effect is robust to a number of different specifications for endogeneity, among other things. The economic effect is pronounced: the impact of VC on patents is up to five times more pronounced between the weakest and strongest IPR regime in the sample.