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Can Venture Capital Foster Innovation in Canada? Yes, but Certain Types of Venture Capital Are Better Than Others

Author

Listed:
  • Tariq Fancy

    (former Principal, CPP Investment Board)

Abstract
Canada’s problem with lagging productivity growth has led policymakers to focus on boosting innovation, in part by supporting Canadian venture capital funding for business. But which types of venture capital (VC) funds are most effective in spurring innovation? This study examines that question in the Canadian context by examining the records of VC funding in generating new patent applications for the period 1996-2008. Overall, Canadian VC funding spurs innovation more effectively on a dollar-for-dollar basis than investment in research and development (R&D). The type of VC fund also matters. Private and institutional VC funds consistently foster innovation; corporate and government VC funds do reasonably well in promoting innovation; but retail, bank and other VC dollars perform poorly on that score.

Suggested Citation

  • Tariq Fancy, 2012. "Can Venture Capital Foster Innovation in Canada? Yes, but Certain Types of Venture Capital Are Better Than Others," e-briefs 138, C.D. Howe Institute.
    • Handle: RePEc:cdh:ebrief:138
    as

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    File URL: https://www.cdhowe.org/public-policy-research/can-venture-capital-foster-innovation-canada-yes-certain-types-venture-capital-are-better-others
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    References listed on IDEAS

    as
    1. Douglas Cumming, 2007. "Financing Entrepreneurs Better Canadian Policy for Venture Capital," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 247, April.
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    Cited by:

    1. Adam Found & Peter Tomlinson, 2012. "Hiding in Plain Sight: The Harmful Impact of Provincial Business Property Taxes," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 368, December.
    2. Philip Cross & Philippe Bergevin, 2012. "Turning Points: Business Cycles in Canada Since 1926," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 366, October.
    3. William B.P. Robson & Alexandre Laurin, 2019. "Less Debt, More Growth: A Shadow Federal Budget for 2019," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 531, February.
    4. William B. P. Robson & Alexandre Laurin & Rosalie Wyonch, 2017. "Getting Real: A Shadow Federal Budget for 2017," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 470, February.
    5. Alex Laurin & William Robson, 2013. "Prudence and Opportunity: A Shadow Federal Budget for 2013," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 375, March.
    6. William B.P. Robson & Alex Laurin, 2016. "Where the Bucks Stop: A Shadow Federal Budget for 2016," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 447, March.
    7. William B.P. Robson & Alexandre Laurin & Rosalie Wyonch, 2018. "Righting the Course: A Shadow Federal Budget for 2018," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 503, February.
    8. Philippe Bergevin & William B.P. Robson, 2012. "More RRBs, Please! Why Ottawa Should Issue More Inflation-Indexed Bonds," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 363, September.

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    More about this item

    Keywords

    Economic Growth and Innovation; venture capital; Canada;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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