Venture Capital and the Financing of Innovation

2The Sectoral Dynamics of Venture Capital

The Schumpeterian model assumes that long-term growth is first and foremost the result of the innovations that are implemented within a given economy. The means by which innovation drives growth is a complex process in the sense that it weaves together different technological, social, economic and financial realms. The process of creative destruction can be read as the process of spreading a new idea that redistributes different shares of the market, changing the rules of the game and the formats of production and distribution of existing products and/or services. The dynamics of the process envisioned by Schumpeter are a conflict between the old and the new. Established firms and existing interests are constantly seeking to block or delay the entry of new competitors into their sectors [AGH 17].

In the context of venture capital, the question becomes the influence this type of financing has on the spread of new ideas. Empirical research indicates a multiplier effect of venture capital on the diffusion of innovation in the sense that this process takes place both inside and outside the venture capital industry. This implies that venture capital-backed companies are profitable, but also, and most importantly, that the effects of the spread of these ideas appear at the macroeconomic level, along with the possible consequences they have on the direction of activity in innovation worldwide [GON 13]. In the view of this author, venture capital ...