Venture Capital and the Di ¤ usion of Knowledge

This paper …nds that Venture Capital (VC) increases the di¤usion of knowledge. Using a data-set of patents issued by companies before they are …nanced by a VC, I …nd that citations to patents increase after VC investments, relative to a control group of patents. To isolate the causal e¤ect, I use ‡uctuations in the size of state public pension funds as exogenous variation in the timing of VC investments. Additional results are consistent with VCs facilitating the transfer of knowledge inside their portfolios, and certifying the quality of their targets’patents. Columbia Graduate School of Business, e-mail: jgonzalez14@gsb.columbia.edu. I am indebted to my advisor Morten Sorensen for his invaluable guidance and encouragement. I am deeply grateful to Bruce Kogut, William Greene, Daniel Paravisini and Daniel Wolfenzon for their suggestions. I thank Arvid Ziedonis and Rosemary Ziedonis for insightful comments. I am grateful for helpful comments from seminar participants at the Fifth Annual Searle Center Conference on Innovation and Entrepreneurship, Universidad de los Andes Colombia Business and Economics Lunch, and Universidad Católica de Chile Business and Economics Lunch. Finally, I am also grateful for funding from the Ewing Marion Kau¤man Foundation.