Hostname: page-component-76fb5796d-45l2p Total loading time: 0 Render date: 2024-04-26T01:44:47.126Z Has data issue: false hasContentIssue false
  • English
  • Français

Knowledge-intensive property rights and the evolution of venture capitalism

Published online by Cambridge University Press:  01 August 2008

CRISTIANO ANTONELLI  and
MORRIS TEUBAL
CRISTIANO ANTONELLI*
Affiliation:
Laboratorio di economia dell'innovazione, Dipartimento di economia, Università di Torino, Italy, Brick (Bureau of Research on Innovation, Complexity and Knowledge), Collegio Carlo Alberto, Italy
MORRIS TEUBAL
Affiliation:
Department of Economics, The Hebrew University of Jerusalem, Israel
*
Correspondence to: Cristiano Antonelli, Dipartimento di Economia, Via PO 53, 10124 Torino, Italy.
Get access Rights & Permissions [Opens in a new window]

Abstract

Venture capitalism is a major institutional innovation based on identifying economies of scope in transactions of technological knowledge, bundled with managerial competence, reputation, screening procedures, and equity. It has paved the way to the emergence of new surrogate markets for knowledge, i.e. financial markets specialized in trading knowledge-intensive property rights. This development has important benefits in terms of risk management and hence profitability of investments in high-tech start-ups. The dynamic efficiency effects of the new institution also derive from the fact that the public at large, through its investments in knowledge-based income streams, contributes to the creation of new economically useful knowledge and capabilities.

Type
Research Article
Information
Journal of Institutional Economics , Volume 4 , Issue 2 , August 2008 , pp. 163 - 182
Copyright
Copyright © The JOIE Foundation 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adams, W. J. and Yellen, J. L. 1976, ‘Commodity Bundling and the Burden of Monopoly’, Quarterly Journal of Economics, 90: 475–498.CrossRefGoogle Scholar
Akerlof, G. A. 1970, ‘The Market for Lemons: Qualitative Uncertainty and the Market Mechanism’, Quarterly Journal of Economics, 84: 488–500.CrossRefGoogle Scholar
Antonelli, C. 2005, ‘Models of Knowledge and Systems of Governance’, Journal of Institutional Economics, 1: 51–73.CrossRefGoogle Scholar
Antonelli, C. 2006, ‘The Governance of Localized Knowledge: An Information Economics Approach for the Economics of Knowledge’, Industry and Innovation, 13: 227–261.CrossRefGoogle Scholar
Antonelli, C. and Teubal, M. 2007, ‘Venture Capital as a Mechanism for Knowledge Governance’, in Vialeand, R. and Etzkowitz, H. (eds), Triple Helix and the Capitalization of Knowledge, Cheltenham: Edward Elgar.Google Scholar
Arora, A., Fosfuri, A., and Gambardella, A. 2001, Markets for Technology, Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Arrow, K. 1962, ‘Economic Welfare and the Allocation of Resources to Invention’, in Nelson, Richard (ed.), The Rate and Direction of Inventive Activity, Chicago: University of Chicago Press for the National Bureau of Economic Research.Google Scholar
Avnimelech, G. and Teubal, M. 2005a, ‘Evolutionary Innovation and High Tech Policies: What Can We Learn from Israel's Targeting of Venture Capital?’, Science, Technology and Economy Program (STE) WP-25-2005, Samuel Neaman Institute, Technion-Israel Institute of Technology.CrossRefGoogle Scholar
Avnimelech, G. and Teubal, M. 2005b, ‘From Direct Support of Business Sector R&D/Innovation to Targeting Venture Capital/Private Equity: A Catching-Up Innovation and Technology Policy Life Cycle Perspective’, forthcoming in Economics of Innovation and New Technology, 17, Special Issue on the Governance of Technological KnowledgeGoogle Scholar
Avnimelech, G. and Teubal, M. 2006, ‘Creating Venture Capital Industries that Co-Evolve with High Tech: Insights from an Extended Industry Life Cycle Perspective of the Israeli Experience’, Research Policy, 35: 1477–1498. Special Issue ‘Mapping the Links between Universities, the Economy and Government: Combining Scientometrics and Evolutionary Economics’.CrossRefGoogle Scholar
Barry, C. 1990, ‘The Role of Venture Capital in the Creation of Public Companies’, Journal of Financial Economics, 27: 447–471.CrossRefGoogle Scholar
Brav, A. and Gompers, P. 1997, ‘Myth or Reality? The Long Run Underperformance of Initial Public Offerings: Evidence from Venture and Non-Venture Capital-Backed Companies’, The Journal of Finance, 52: 1791–1821.Google Scholar
Black, B. R. and Gilson, R. J. 1998, ‘Venture Capital and the Structure of Capital Market: Banks Versus Stock Markets’, Journal of Financial Economics, 47: 243–277.CrossRefGoogle Scholar
Brown, J. R., Fazzari, S. M., and Petersen, B. C. 2007, ‘Financing Innovation and Growth: Cash Flow External Equity and the 1990s R&D Boom’, working paper of the Weidenbaum Center on the Economy, Government and Public Policy at Washington University.Google Scholar
Carlton, D. W. and Waldman, M. 2002, ‘The Strategic Use of Tying to Preserve or Create Market Power in Evolving Industries’, Rand Journal of Economics, 33: 192–220.CrossRefGoogle Scholar
Carpenter, R. E. and Petersen, B. C. 2002, ‘Capital Market Imperfections High Tech Investments and New Equity Financing’, Economic Journal, 112: 54–72.CrossRefGoogle Scholar
Florida, L. and Kenney, M. 1988, ‘Venture Capital Financed Innovation and Technological Change in the USA’, Research Policy, 17: 119–137.CrossRefGoogle Scholar
Gilson, R. 2003, ‘Engineering a Venture Capital Market: Lessons from the American Experience’, Stanford Law Review, 55: 1067–1104.Google Scholar
Gilson, R. and Kraakman, R. 1984, ‘The Mechanisms of Market Efficiency’, Virginia Law Review, 70: 549–644.CrossRefGoogle Scholar
Gompers, P. 1994, ‘The Rise and Fall of Venture Capital’, Business and Economic History, 23: 1–26.Google Scholar
Gompers, P. 1995, ‘Optimal Investment Monitoring and the Staging of Venture Capital’, Journal of Financial Economics, 32: 1461–1489.Google Scholar
Gompers, P. and Lerner, J. 1996, ‘The Use of Covenants: An Empirical Analysis of Venture Partnership Agreements’, Journal of law and Economics, 39: 463–498.CrossRefGoogle Scholar
Gompers, P. and Lerner, J. 1998 ‘What Drives Venture Capital Fund Raising’, Brooking Papers on Economic Activity (Microeconomics), pp. 149–192.Google Scholar
Gompers, P. and Lerner, J. 1999, The Venture Capital Cycle, Cambridge, MA: The MIT Press.Google Scholar
Gompers, P. and Lerner, J. 2001, ‘The Venture Capital Revolution’, Journal of Economic Perspectives, 15: 145–168.CrossRefGoogle Scholar
Gompers, P. and Lerner, J. 2004, The Venture Capital Cycle, second edition, Cambridge, MA: MIT Press.Google Scholar
Guilhon, B. 2004, ‘Markets for Knowledge: Problems, Scope and Economic Implications’, Economics of Innovation and New Technology, 13: 165–182.CrossRefGoogle Scholar
Hall, B. H. 2002, ‘The Financing of Research and Development’, Oxford Review of Economic Policy, 18: 35–51.CrossRefGoogle Scholar
Hsu, D. and Kenney, M. 2005, ‘Organizing Venture Capital: The Rise and Demise of American Research and Development Corporation, 1946–1973’, Industrial and Corporate Change, 14: 579–616.CrossRefGoogle Scholar
Kenney, M. (ed.) 2000, Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region, Stanford, CA: Stanford University Press.CrossRefGoogle Scholar
Kenney, M. and Florida, R. 2000, ‘Venture Capital in Silicon Valley: Fueling New Firm Formation’, in Kenney, M. (ed.), Understanding Silicon Valley: The Anatomy of an Entrepreneurial Region, Stanford, CA: Stanford University Press, chapter 5.CrossRefGoogle Scholar
King, R. and Levine, R. 1993, ‘Finance and Growth: Schumpeter Might Be Right’, Quarterly Journal of Economics, 108: 717–737.CrossRefGoogle Scholar
Kortum, S. and Lerner, J. 2000, ‘Assessing the Contribution of Venture Capital to Innovation’, Rand Journal of Economics, 31: 674–692.CrossRefGoogle Scholar
Lee, C. M., Miller, W. F., Hancock, M. G., and Rowen, H. S. (eds) 2000, The Silicon Valley Edge: A Habitat for Innovation and Entrepreneurship, Stanford: Stanford University Press.CrossRefGoogle Scholar
Lerner, J. 1995, ‘Venture Capitalists and the Oversight of Private Firms’, Journal of Finance 50: 301–318.CrossRefGoogle Scholar
Lerner, J. 2002, ‘When Bureaucrats Meet Entrepreneurs: The Design of Effective “Public Venture Capital Programs”’, Economic Journal, 112: 73–84.CrossRefGoogle Scholar
Mason, C. and Harrison, R. 2000, ‘Informal Venture Capital and the Financing of Emergent Growth Businesses’, in Sexton, D. and Landström, H. (eds), Handbook of Entrepreneurship, Oxford: Blackwell Publishers.Google Scholar
Mayer, C., Schoors, K., and Yafeh, Y. 2003, ‘Sources of Funds and Investment Activities of Venture Capital Funds: Evidence from Germany, Israel, Japan and the UK’, NBER Working Paper No. 9645, National Bureau of Economic Research.CrossRefGoogle Scholar
Megginson, W. and Weiss, K. A. 1991, ‘Venture Capitalist Certification in IPO's’, Journal of Finance, 46: 879–903.CrossRefGoogle Scholar
Menard, C. and Shirley, M. M. (eds) 2005, Handbook of New Institutional Economics, Dordrecht: Springer.CrossRefGoogle Scholar
Myers, S. C. and Majluf, N. S. 1984, ‘Corporate Financing and Investment Decisions when Firms Have Information that Investors Do Not’, Journal of Financial Economics, 13, 187–221.CrossRefGoogle Scholar
Nelson, R. R. 1959, ‘The Simple Economics of Basic Scientific Research’, Journal of Political Economy, 67: 297–306.CrossRefGoogle Scholar
Nelson, R. 1994, ‘The Co–Evolution of Technology, Industrial Structure and Supporting Institutions’, Industrial and Corporate Change, 3: 47–63.CrossRefGoogle Scholar
Rajan, R. and Zingales, L. 1998, ‘Financial Dependence and Growth’, American Economic Review, 88: 559–586.Google Scholar
Rajan, R. and Zingales, L. 2003, ‘The Great Reversal: The Politics of Financial Development in the Twentieth Century’, Journal of Financial Economics, 69: 5–50.CrossRefGoogle Scholar
Salhman, W. 1990, ‘The Structure and Governance of Venture Capital Organizations’, Journal of Financial Economics, 39: 473–522.CrossRefGoogle Scholar
Saxenian, A. 1994, Regional Advantage: Culture and Competition in Silicon Valley and Route 128, Cambridge, MA: Harvard University Press.Google Scholar
Schumpeter, J. A. 1912/1934, The theory of economic development, Cambridge, MA: Harvard University Press.Google Scholar
Schumpeter, J. A. 1947, ‘The Creative Response in Economic History’, Journal of Economic History, 7: 149–159.CrossRefGoogle Scholar
Sorenson, O. and Stuart, T. E. 2001, ‘Syndication Networks and the Spatial Distribution of Venture Capital Investment’, American Journal of Sociology, 106: 1546–1588.CrossRefGoogle Scholar
Spulber, D. 1999, Market Microstructures: Intermediaries and the Theory of the Firm, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Stiglitz, J. E. 1985, ‘Credit Markets and Capital Control’, Journal of Money Credit and Banking, 17: 133–152.CrossRefGoogle Scholar
Stiglitz, J. E. 2000, ‘The Contributions of the Economics of Information to Twentieth Century Economics’, Quarterly Journal of Economics, 115: 1441–1478.CrossRefGoogle Scholar
Stiglitz, J. E. 2002, ‘Information and the Change in the Paradigm in Economics’, American Economic Review, 92: 460–502.CrossRefGoogle Scholar
Stiglitz, J. E. and Weiss, A. 1981, ‘Credit Rationing in Markets with Imperfect Information’, American Economic Review, 71: 393–410.Google Scholar
Teece, D. 1986, ‘Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy’, Research Policy, 15: 285–305.CrossRefGoogle Scholar
Teece, D. J. 2000, Managing Intellectual Capital, Oxford: Oxford University Press.Google Scholar
Teubal, M. and Zuscovitch, E. 1997, ‘Evolutionary Product Differentiation and Market Building in Turbulent Environments’, Economics of Innovation and New Technology, 4: 265–286.CrossRefGoogle Scholar
Van Burg, U. and Kenney, M. 2000, ‘Venture Capital and the Birth of the Local Area Networking Industry’, Research Policy, 29: 1135–1155.CrossRefGoogle Scholar
Yiting, L. 1998, ‘Middlemen and Private Information’, Journal of Monetary Economics, 42: 131–159.Google Scholar
Wright, M. and Robbie, K. 1998, ‘Venture Capital and Private Equity: A Review and Synthesis’, Journal of Business Finance and Accounting, 25: 521–569.CrossRefGoogle Scholar