This study investigates how the geography of venture capital (VC) affects firms’ relocation decisions, trying to identify whether relocation act as a signal of quality to VC investors. The econometric analysis relies on the VICO 4.0 dataset, covering the population of European firms receiving VC in the period 1998-2015 and a large sample of comparable non-VC-Backed ventures. The sample was limited to German and Dutch ventures since they were the only whose complete relocating information was available in the Orbis database. Results revealed that firms are more prone to relocate when currently located in high VC density areas and at shorter distance from the closest main VC hub. Furthermore, before attracting initial VC, companies revealed moving towards areas where local VC availability was significantly lower than the previous location, while remaining at similar distance to the closest main VC hub. On the other hand, once obtained the first round of investment, VC-Backed firms resulted more prone to relocate than pre-investment, and to move towards areas with a similar level of local VC density. Rather than to the geography of VC supply, firm’s relocation decision relies more on other local conditions and own company-level characteristics. Results indicate a higher propensity to relocate for younger and smaller sized ventures with a greater degree of intangibles assets, and who are currently located in less innovative areas where the average wage level is high. Specifically, both pre and post investment firms tend to relocate towards areas where the average labour cost is significantly lower than in the previous location. Finally, relocation does not show any significant impact on ventures’ probability to gather initial VC investments. Rather than to relocation, VC investors result giving more relevance to the signal of quality provided by companies’ characteristics, mainly investing in more innovative ventures characterized by low debt and high cash generation rate.
Questo studio esamina come la geografia dei fondi di venture capital (VC) influenzi la scelta delle aziende di rilocalizzarsi, valutando inoltre se spostandosi le aziende aumentino la loro probabilità di ricevere investimenti. Per svolgere l’analisi econometrica si è attinto al database VICO 4.0, che include sia aziende Europee che nel periodo 1998-2015 hanno ricevuto VC, che un campione di controllo che non ha ottenuto investimenti. Dato che il database Orbis riporta informazioni sugli spostamenti solo per aziende tedesche ed olandesi, l’analisi si riferisce esclusivamente a queste due nazioni. I risultati indicano che le aziende sono più propense a rilocalizzarsi, quando situate in aree caratterizzate da un’elevata densità di VC e più vicine al principale VC hub. Prima di ricevere investimenti le aziende risultano muoversi verso aree dove la disponibilità locale di VC è inferiore rispetto alla posizione precedente, rimanendo ad una distanza simile rispetto al più vicino VC hub. Nonostante le aziende dopo aver ricevuto VC risultino essere più inclini a spostarsi di prima, esse appaiono dirigersi verso aree con simili livelli di VC. La geografia dei fondi di VC ha un impatto significativo nella decisione di rilocalizzarsi ma non risulta esserne il fattore determinante. La letteratura indica che le scelte di rilocalizzazione sono determinate da differenti fattori legati alle caratteristiche dell’azienda e ad altre condizioni locali. I risultati mostrano che sono più inclini a rilocalizzarsi le imprese più giovani, di piccole dimensioni e con un elevata quota di attivo rappresentata da immobilizzazioni immateriali, nonché aziende localizzate in aree meno innovative e caratterizzate da livelli salariali più elevati. Inoltre, le aziende tendono a spostarsi verso aree dove il salario medio è minore. Infine, rilocalizzarsi non risulta avere un impatto significativo sulla probabilità di attrarre investimenti di VC. Gli investitori risultano dare maggiore rilevanza al segnale di qualità fornito dalle caratteristiche delle aziende, tendendo ad investire in aziende maggiormente innovative, poco indebitate e con minori tassi di generazione dei flussi di cassa.
The role of venture capital supply in firms' relocation decisions : empirical results from Germany and the Netherlands
Fumagalli, Luca
2019/2020
Abstract
This study investigates how the geography of venture capital (VC) affects firms’ relocation decisions, trying to identify whether relocation act as a signal of quality to VC investors. The econometric analysis relies on the VICO 4.0 dataset, covering the population of European firms receiving VC in the period 1998-2015 and a large sample of comparable non-VC-Backed ventures. The sample was limited to German and Dutch ventures since they were the only whose complete relocating information was available in the Orbis database. Results revealed that firms are more prone to relocate when currently located in high VC density areas and at shorter distance from the closest main VC hub. Furthermore, before attracting initial VC, companies revealed moving towards areas where local VC availability was significantly lower than the previous location, while remaining at similar distance to the closest main VC hub. On the other hand, once obtained the first round of investment, VC-Backed firms resulted more prone to relocate than pre-investment, and to move towards areas with a similar level of local VC density. Rather than to the geography of VC supply, firm’s relocation decision relies more on other local conditions and own company-level characteristics. Results indicate a higher propensity to relocate for younger and smaller sized ventures with a greater degree of intangibles assets, and who are currently located in less innovative areas where the average wage level is high. Specifically, both pre and post investment firms tend to relocate towards areas where the average labour cost is significantly lower than in the previous location. Finally, relocation does not show any significant impact on ventures’ probability to gather initial VC investments. Rather than to relocation, VC investors result giving more relevance to the signal of quality provided by companies’ characteristics, mainly investing in more innovative ventures characterized by low debt and high cash generation rate.| File | Dimensione | Formato | |
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https://hdl.handle.net/10589/174022