Venture Capital and the Financing of Innovation

3The Three Structures for Interpreting Venture Capital: The Market, Industry and Institutions

In this chapter, we will seek to provide a summary of the thinking developed in this book. The first chapter focused on economic agents in their desire to reach a contract and in their ability to bring about changes in the risk boundaries, particularly with regard to venture capitalists. With the financing applicants, we analyzed the entrepreneurial risk and the careful consideration of the trade-offs they would make between being in a position of managing a start-up versus the situation they would face as employees. The various contractual terms that are used give rise to an analysis of venture capital in terms of the market.

The second chapter considered the sectoral orientation of venture capital. Venture capital is a mechanism for financing innovation which affects a wide range of activities, including high-tech industries. The investments made in these industries are the vehicle for radical innovations and, as such, are preferred as an area to implement policies, particularly in the United States. In analyzing the decisive factors for this mechanism with respect to high-tech industries in Europe, we have introduced macroeconomic and macro-social variables, including institutions.

In this third chapter, we analyze venture capital more systematically as an industry for financing innovation, with the consideration that the foundations of this activity are institutional. Both markets ...