SHAREHOLDING BY VENTURE CAPITALISTS AND R&D INVESTMENT OF START-UP FIRMS

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Hiroyuki Okamuro, Jian Xiong Zhang

DOI:10.22495/cocv7i4p10

Abstract

We analyze the influence of ownership structure on the R&D (research and development) investment of start-up firms. Previous studies on the relationship between ownership and R&D have targeted on large listed firms and focused on ownership concentration, regardless of the types of large shareholders. We argue that shareholder’s type is an important factor of R&D investment under asymmetric information, and that R&D projects, particularly those of start-up firms, strongly depend on the financing from venture capitalists (VCs). Using a unique dataset of Japanese start-up firms, we find that the shareholding by VCs have, in fact, positively affects the R&D investment and that the impact of VCs funding is especially large when the shareholding by the lead VC exceeds 10%.

Keywords: Ownership Structure, R&D, Listed Firms, Shareholders, Japan

How to cite this paper: Okamuro, H., Zhang, J. X. (2010). Shareholding by venture capitalists and R&D investment of start-up firms. Corporate Ownership & Control, 7(4), 142-149. http://doi.org/10.22495/cocv7i4p10