Stepping Up Venture Capital to Finance Innovation in Europe

By Nathaniel G Arnold, Guillaume Claveres, Jan Frie

July 12, 2024

Preview Citation

Format: Chicago

Nathaniel G Arnold, Guillaume Claveres, and Jan Frie. Stepping Up Venture Capital to Finance Innovation in Europe, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Relative to the US, productivity growth and investment in R&D in lagging in the EU, where it is more difficult to finance and scale up promising, innovative startups. Many of the most successful EU startups move elsewhere for financing, causing the EU to lose out on both the direct growth benefits and positive spillovers from these innovative firms. The EU could nurture innovative startups by accelerating the development of its venture capital (VC) ecosystem. Reducing regulatory frictions, especially ones that deter pensions funds and insurers from investing in VC, combined with well-designed tax incentives for R&D investments could help accelerate the development of the VC sector. These and other key CMU initiatives, such as the consolidation of stock markets and reforming and harmonizing insolvency regimes, will take time. Given the urgency to boost innovation, giving public financial institutions like the European Investment Fund a more active and expanded role in kickstarting VC markets where needed and in familiarizing investors with the VC asset class can be a helpful interim step.

Subject: Expenditure, Financial institutions, Financial markets, Insurance companies, Labor, Mutual funds, Pension spending, Pensions, Stock markets

Keywords: Capital Markets Union, EU legislation, EU startup, Europe, Insurance companies, Kickstarting VC market, Mutual funds, Pension spending, Pensions, Productivity, Startup financing stage, Startups, Stock markets, VC sector, Venture capital

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/146
Stock No:

WPIEA2024146
ISBN:

9798400280771
ISSN:

1018-5941

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