High risk, high reward? : -A quantitative study of venture capital investments effect on new business creation

University essay from KTH/Skolan för industriell teknik och management (ITM)

Abstract: In this thesis, an econometric analysis has been conducted in order to research the rate of new business creation that venture capital investments potentially generate. Data was gathered from 32 OECD countries between the years 2006-2017, to establish to what degree TEA (total entrepreneurial activity) and TEA opportunity based, was fuelled by venture capital investments. In comparison to the majority of the literature, the findings of this thesis give a more nuanced picture to the enthusiastic attitude towards venture capital. As the results indicate a less significant impact of venture capital investments than expected, this thesis serves as an important counterweight to the overall positive stance towards the finance form. However, other findings of the study are in line with previous literature. For example, high GDP is associated to high entrepreneurial activity and high taxes discourage entrepreneurial activity. It is also worth mentioning the subtle, but existing, disparity in the results between TEA and TEA opportunity based. This indicates that further and more thorough research should be conducted within these two different measurements.

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