The Impact of Venture Capital Expenditures on Innovation in Europe

ABSTRACT :We investigate the relationship between “Venture Capital Expenditures” and innovation inEurope. Data are collected from the European Innovation Scoreboard for 36 countries in the period 2010-2019.We perform Panel Data with Fixed Effects, Panel Data with Random Effects, Pooled OLS, WLS, DynamicPanel. Results show that the level of Venture Capitalist Expenditure is positively associated to “ForeignDoctorate Students” and “Innovation Index” and negatively related to “Government Procurement of AdvancedTechnology Products”, “Innovators”, “Medium and High-Tech Products Exports”, “Public-Private CoPublications”. In adjunct, cluster analysis is realized with the algorithm k-Means and the Silhouette coefficient,and we found the presence of four different clusters for the level of “Venture Capital Expenditures”. Finally, wepropose a confrontation among 8 different algorithms of machine learning to predict the level of “VentureCapital Expenditures” and we find that the linear regression generates the best results in terms of minimizationof MAE, MSE, RMSE.

KEYWORDS: Innovation and Invention: Processes and Incentives, Management of Technological Innovationand R&D, Technological Change: Choices and Consequences, Intellectual Property and Intellectual Capital,Open Innovation, Government Policy