Which form of venture capital is most supportive of innovation? Evidence from European biotechnology companies

We argue that different forms of venture capital contribute differently to the innovation process and, consequently, differ in their impact on portfolio companies' innovation output. Our results suggest that the innovation output of companies financed by independent VCs increases significantly faster than that of both non-VC-backed companies and of companies financed by governmental VCs. However, governmental VCs may be beneficial for innovation by complementing the skills and resources provided by an independent VC in a heterogeneous syndicate.