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JOURNAL OF APPLIED BUSINESS AND ECONOMICS
What Drives Venture Capital Investments in Europe? New
Results from a Panel Data Analysis
Author(s): Mondher Cherif, Kaouthar Gazdar
Citation: Mondher Cherif, Kaouthar Gazdar, (2011) "What Drives Venture Capital Investments in Europe? New Results from a Panel Data Analysis," Journal of Applied Business and Economics, Vol. 12, Iss. 3, pp. 122 - 139
Article Type: Research paper
Publisher: North American Business Press
Abstract:
We examine the determinants of venture capital investments across 21 European countries over
1997-2006. Our empirical model includes many of the macroeconomic determinants already
tested in previous studies. But, in addition, we introduce for the first time variables that intend to
capture the institutional environment. Using a panel data technique of estimation, we find that
GDP growth, market capitalization, research and development expenditures and unemployment
are the most macroeconomic determinants of European venture capital investments. We show
also that early stage investments and funds raised are differently affected by institutional quality.
Thus, while the index of economic freedom has a significant and a positive effect on funds raised,
it does not appear a significant determinant of early stage investments.
