Access to finance for innovation: the role of venture capital and the stock market

Financial constraints for young and small firms can prevent them from contributing to
innovation and the creation of new jobs. The paper analyzes two of the several institutional
mechanisms implemented to overcome that hurdle: the development of the venture capital
market and access to the stock market. The analysis is based on the information provided by
two of the Scoreboards used to monitor innovative activity in Europe: the IUS (Innovation
Union Scoreboard) and the R&D Scoreboard. The former was used to study the determinants
of venture capital/GDP intensity in Europe. The second was used to try to assess the
stock market’s contribution to R&D investment. The results show that, in the first case, the
venture capital market complements structural features such as R&D intensity and market
capitalization, is more volatile, and seems uninfluenced by competition-adverse regulations;
in the second case, the analysis indicated that unlisted SMEs are more research intensive.