Geography of venture capital financing: A global perspective

Abstract

The history of mankind reveals that clustering of economic activities takes place depending on various favorable environmental factors. Even within venture capital financing, this clustering is noticeable. It is well established that venture capital does have an impact on wealth creation for entrepreneurs, venture capitalists, and the economy as a whole. The present study tries to throw light on the clustering of venture capital activities around the world, and in different regions of the world, during 1997–2005. This is followed with computation of Venture Capital Development Index (VCDI) for the period 1998–2004. With respect to the global venture capital scene, the VCDI reveals that concentration is more towards the regions where technological advancement is taking place, supporting the hypothesis that venture capital is closely associated with technology and innovation. Even the research on worldwide venture capital financing shows such concentration towards few regions only. With respect to the VCDI, a seven-years analysis shows the growth trajectory of the venture capital industry in a specific region compared to the total, especially as a source of financing for technology-based firms in their early stage. The more technologically advanced the region, the greater the VCDI.