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  • 2003
  • Chapter
  • Innovation Policy and the Economy, Volume 3

Short-Term America Revisited? Boom and Bust in the Venture Capital Industry and the Impact on Innovation

By: Josh Lerner and Paul A. Gompers
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Abstract

This chapter seeks to understand the implications of the recent decline in venture activity for innovation. It argues that the situation may not be as grim as it initially appears. While there are many reasons for believing that on average venture capital has a powerful effect on innovation, the effect is far from uniform. During boom periods, the prevalence of over funding of particular sectors can lead to a sharp decline in the effectiveness of venture funds. While prolonged downturns may eventually lead to good companies going unfounded, many of the dire predictions today seem overstated.

Keywords

Venture Capital; Innovation And Invention; Business Cycles; Financial Services Industry; United States

Citation

Lerner, Josh, and Paul A. Gompers. "Short-Term America Revisited? Boom and Bust in the Venture Capital Industry and the Impact on Innovation." In Innovation Policy and the Economy, Volume 3, edited by Adam B. Jaffe, Josh Lerner, and Scott Stern, 1–28. MIT Press, 2003.
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About The Authors

Josh Lerner

Entrepreneurial Management
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Paul A. Gompers

Finance
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    Entrepreneurial Finance Vignettes - 2021

    By: Paul A. Gompers
More from the Authors
  • Apax Partners and Duck Creek Technologies By: Josh Lerner, Terrence Shu and Alys Ferragamo
  • How Venture Capitalists Make Decisions By: Paul A. Gompers, Will Gornall, Steven Kaplan and Ilya Strebulaev
  • Entrepreneurial Finance Vignettes - 2021 By: Paul A. Gompers
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