Public Expenditure in Research and Development and Venture Capital Commitments

Hernan Herrera-Echeverry


Using a comprehensive database of 40 countries: the OECD country-members plus Argentina, China, Romania, Russian Federation, Singapore and South Africa, from 1998 to 2012, we find that Public Expenditure on Research and Development (PR&D) has a positive effect on Venture Capital (VC) Investment. This is especially true in countries with higher institutional quality and higher level of articles published by the scientific community. This could indicate two things: first, that PR&D is more efficient and strategically addressed in countries with high institutional quality; and second, it confirms that scientific production works in partnership with PR&D in generating VC opportunities. PR&D is more important for the generation of VC investments in countries with lower infrastructure; in these countries, the government decision for increasing PR&D takes more relevance in fostering active VC markets. Above conclusions are confirmed for early stage (ES), high technology (HT) and manufacturing sector (MS) venture capital investments, indicating that PR&D is specifically important for this three kind of VC investments,  however infrastructure availability remains definitive to increase MS venture capital investments



Venture Capital, Public Expenditure in R&D, Institutional quality, High Technology Investments, Start-up

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Print ISSN: 1392-2785
Online ISSN: 2029-5839