The Effect of Private Equity and Venture Capital on Corporate Innovation and Growth

The study investigates the effect of private equity and venture capital on the innovative performance and growth of enterprises. Through its selection of a statistical control group in a two-stage process, the study considers the effect of selection distortions (e.g., through the legal form, industry, regional distribution, age and size structure, credit standing, selected balance sheet parameters, innovative capacity and international orientation of enterprises). Its findings show that selection effects dominate with regard to innovative performance. Private equity and venture capital investment thus do not make a firm more innovative but they tend to finance those enterprises that are more innovative and export-oriented than the average. On the other hand, the study confirms a very robust positive impact on growth and employment that is the result of direct causal effects from the value added through actively managed investments.