A comparison of the innovation performance of European entrepreneurial firms backed by Corporate Venture Capital and Independent Venture Capital

Abstract: Corporate venture capital (CVC) has seen an enormous rise in Europe over the past decade, however, has been scarcely researched in terms of its impact on innovation. This paper is the first one to examine the impact of corporate venture capital (CVC) on the innovation, measured as number of patents granted and number of citations per patent, of public portfolio firms in comparison to firms backed by independent venture capital (IVC) in Europe. The results of our fixed effects model show that companies backed by CVC have higher rates of innovation performance but lower quality innovation in comparison to their peers backed by IVC in the period under consideration (2000-2020). The selection effect has been mitigated by using propensity score matching. Our findings contrast previous research in the USA and thus provide novel insights on the effectiveness of different types of venture capital in Europe. Our results imply that different strategies are necessary to nurture both quality and quantity of innovation.