When do new firms benefit from VC investment? The moderating role of firm age and size

Abstract

This study examines the effects of venture capital (VC) investment on the performance of new firms according to investor type (i.e., independent and captive VCs). In particular, the study explores whether the type of new firms, based on attributes such as firm age and size, moderates the effects of VC investment. To do this, we adopt a matching technique and estimate the average treatment effect of receiving a first-time VC investment on new firm performance (growth and productivity). The results show that the positive effects of independent VC investment are more pronounced for older and larger firms, whereas those of captive VC investment are more pronounced for younger and smaller firms.