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Does Venture Capital Spur Innovation - Research Paper Example

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The author of the current research paper "Does Venture Capital Spur Innovation" underlines that Venture capital became a prominent feature of economic development in the eighties when such funds gained in volume and prominence. Capital made available purportedly for higher risk…
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Does Venture Capital Spur Innovation
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Download file to see previous pages Some authorities over its importance, some it's insignificance, and others its deterrent effect on the development of innovative projects. This discussion aims to address this question by conducting a survey of academic literature contained in journal articles concerning venture capital’s role and effect in innovation. It will begin with a description of what innovation is and how it is undertaken, relate findings of empirical studies on innovation supported by venture capital, and derive insight into the role of venture capital as a driver of innovation.
According to Sylver (2006), the term “innovation” is defined simply as “introducing something new.” She perceptively notes that there are no qualifiers to this simple statement, no standard as to how radical or ground-breaking the new development would be, only that it should be better than what used to be the standard. Actually, innovation means different things to different people, depending upon the proponent’s motivation. Sylver classifies three situations wherein corporations would typically pursue innovations, as follows:
(1) The corporations are currently suffering in the situation termed the “burning platform”; that is, their profits are dropping, their products are not selling, and they do not know what to do about it.
(2) They firms have emerged from the “burning platform” and had realized that innovation is not a temporary recourse (a “start/stop process”, according to Sylver), but a continuing evolution that demands constant attention.
(3) The corporations are the leader in their industry, and they are determined to maintain that position. A reasonable degree of failure is acceptable within their organizational culture, due to their understanding of statistical risks in product development.
For each of these motivations, there is a different meaning given to innovation. ...Download file to see next pagesRead More
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