Location Factors and Investment Potential of Risk Capital in Austria

By selecting firms with high growth and profitability potential, investors of risk capital play an important role for corporate innovation and financing. Yet, the Austrian risk capital market is underdeveloped. Investment in venture capital and for growth of firms amounted to a modest 0.04 percent of annual GDP between 2007 and 2011. This ratio lies substantially below comparable countries such as Belgium or Denmark (0.09 percent each) or Germany (0.06 percent). On the basis of international comparisons, this article illustrates how risk capital is embedded in the economic system. In addition to country-specific features of the financial and innovation system, key determinants for risk capital investment are sector-specific regulations, the underlying industrial structures and firm dynamics, which constitute the pool of potential investment projects.