Empirical Study on Venture Capital Spur Patenting Evidence from State-Level Cross-Sectional Data in United States

We test the venture capital and patenting hypothesis state-level cross-section data for the United States, whereas previous research has been industry and firm based. We categorize R& D funds (federal research, industry research and academic research funds). We include the income level (gdp per capita) and size of the states (gdp, population, civilian labor force). We consider human capital factors as adding science and research holders of each state through different categories (doctoral sciences and engineering degree holders, graduate students of science and engineering, post doctorate students). Finally, we include the grants received by the Small Business Innovation Center. Even after controlling so many variables, our results suggest that venture funding has a strong positive impact on patenting in state-level cross-section data. A one billion dollar increase in venture capital is associated with an increase in 440 patents whereas a one billion dollar increase in corporate R& D is associated with an increase in 140 patents. Kortum and Lerener [1] find that a dollar of venture capital is seven times more powerful in stimulating pattern than a dollar of corporate R& D. Our research suggests that this difference is three times.