Venture Capital and the Financing of Innovation

Introduction

“Really, what is analyzing, if not choosing and deferring?”

[ALA 10, p. 174]

The works carried out on the subject of venture capital analyze this financing mechanism in terms of the stages of intervention, the players involved, the actions and innovative practices they implement. They also focus on the institutional arrangements that govern them, as well as on the performance of innovation and growth of the company, the sector in which it operates, and the economy as a whole.

What economists refer to as innovation implies novelty, but it is not novelty in itself that constitutes innovation. A new product, service, or process concept may be filed away and never brought into use. What matters is how this concept is implemented in economic practice so that the new feature introduced changes previously established practices and, in turn, the ways in which certain types of problems are addressed. The idea of innovation therefore implicitly refers to methods of producing, consuming or financing, that is to an existing routine that is an accepted way of dealing with a recurring problem. We will use the definition proposed by Vanberg [VAN 92]: “An innovation can be considered as a routine that purports to be new and potentially superior with regard to the accepted way of dealing with a given problem”.

The phasing out of existing routines is a concept that comes directly from Schumpeterian analysis. In his book Capitalism, Socialism and Democracy [SCH 51], Schumpeter ...