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Venture capital and private equity financing: an overview of recent literature and an agenda for future research

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Abstract

This paper surveys the growing body of recent literature on venture capital (VC) and private equity (PE) and formulates an agenda for future research. Specifically, it covers and categorizes 314 articles that have appeared in top leading international journals since 2011 and points to areas that deserve deeper investigation. 67.8% of these works deal exclusively with VC and 26.8% deal exclusively with PE. The main “hot” topics in VC and PE research are: (1) heterogeneity (e.g., in affiliation, experience, reputation) within the VC and PE industries and its effects, (2) the causal link between VC and PE financing and various aspects of company performance, such as growth or innovation, (3) the performance of VC and PE funds and how to measure it properly. In the literature on VC, (4) internationalization and (5) the processes through which VC investors and entrepreneurs select and match with each other are also highly relevant topics. Most recent works (81.2%) are empirical and strategies that aim at identifying causal effects have been getting widespread. Although new sources of data have been used and the European (and to a lesser extent Asian) VC and PE industries have been gaining ground in recent research, more than 52% of all empirical papers still rely on US data.

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Notes

  1. The statistics in the main body of the paper and in the tables cover the entire sample. Because of space constraints, not all these 314 articles will be explicitly mentioned in the text.

  2. This number would have been much higher if the large body of literature that distinguishes between different types of VC and PE firms had also been included. However, the heterogeneity within the VC or PE industry is reflected in a different category.

  3. I include all articles that were published by June 30, 2016 and those forthcoming articles that were available electronically at that time.

  4. The VICO database is a proprietary database that contains information on VC-backed on non-VC-backed high-tech young companies operating in seven European countries (Belgium, Finland, France, Germany, Italy, Spain, and the United Kingdom). It was developed within the project “Financing Entrepreneurial Ventures in Europe”, funded by the European Commission under the Seventh Framework Programme.

  5. Their main dependent variables are abnormal performance, public market equivalent and abnormal cash-in/cash-out multiple, which are constructed using PE fund inflows and outflows per deal.

  6. I will not deal with this subgroup because only three papers focus on issues related to BVCs.

  7. Lerner (2008) provides an extensive picture of the different ways governments have supported VC investments across countries.

  8. Nam et al. (2014) find that earnings management is more pronounced in VC-backed than in non-VC-backed companies, but that the VC reputation moderates this effect.

  9. The sample also includes studies that were in press or forthcoming (and electronically available) at the end of June 2016.

  10. In this final category, no A+ or A journals are listed.

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  1. Universität Hohenheim, Stuttgart, Germany

    Tereza Tykvová

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Appendix: what does this overview cover?

Appendix: what does this overview cover?

In this overview I include articles on VC and PE financing that were published between January 2011 and June 2016Footnote 9 in top leading international journals. To identify these journals, I rely on the VHB-JOURQUAL3 classification and cover all outstanding (A+) and leading (A) journals in the following categories: General Business Administration (ABWL), Banking and Finance (BA-FI), International Management (INT), Strategic Management (SM), Technology, Innovation and Entrepreneurship (TIE), Entrepreneurship (ENT) and Small and Middle-sized Enterprises (KMU).Footnote 10 In two categories (Banking and Finance, International Management), I also include a few important and relevant B journals. The final sample comprises 39 journals, which are listed in Table 10. Most of them fall into a single category, a few belong to two different categories and one, the Strategic Management Journal, is included in three.

Table 10 Alphabetical list of journals included in this overview
Full size table

For the purposes of this study, I distinguish between two broad types of journals: business and management journals (BUS-MAN) and finance and economics journals (FIN-ECON). I classify all journals from the BA-FI category as FIN-ECON. All remaining journals, except ABWL journals, belong to BUS-MAN. For the classification of ABWL journals see Table 10.

For this overview, I consider all articles from these journals that include at least one of the following keywords in the title or in the abstract: venture capital, VC, venture capitalist, venture capitalists, private equity, PE, buyout, buyouts, LBO, LBOs. The first four keywords mark the category “VC”, the remaining six the category “PE”. If the title and/or the abstract contain words from both, the “VC” and the “PE” category, I include the study to the combined “VC/PE” category. Seven journals have not published any articles with any of these keywords within the period of interest. From the initial sample of articles I collected, I exclude articles that do not concern mainly or exclusively VC or PE investors, but merely consider data from a sample of buyouts or VC-backed companies to answer a general question. I also exclude articles that examine private equity in a broad sense, i.e. all equity financing that is not public equity (e.g., articles on the private equity premium puzzle) and case studies designed for teaching. The final sample on which this overview is based comprises 314 articles from 31 journals, of which 14 belong to BUS-MAN and 17 to FIN-ECON. Table 10 shows that the journal in which most articles on VC or PE topics have been published is the Journal of Corporate Finance (38 articles), followed by the Journal of Business Venturing (27 articles) and The Review of Financial Studies (23 articles).

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Tykvová, T. Venture capital and private equity financing: an overview of recent literature and an agenda for future research. J Bus Econ 88, 325–362 (2018). https://doi.org/10.1007/s11573-017-0874-4

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