Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • Summer 2020
  • Article
  • Journal of Economic Perspectives

Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn

By: Josh Lerner and Ramana Nanda
  • Format:Print
ShareBar

Abstract

Venture capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the venture model. At the same time, venture capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional venture capital investors; 2) the relatively small number of venture capital investors who hold, and shape the direction of, a substantial fraction of capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by venture capital firms. While our ability to assess the social welfare impact of venture capital remains nascent, we hope that this article will stimulate discussion of and research into these questions.

Keywords

Innovation; Financing; Venture Capital; Financing and Loans; Technological Innovation

Citation

Lerner, Josh, and Ramana Nanda. "Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn." Journal of Economic Perspectives 34, no. 3 (Summer 2020): 237–261.
  • Find it at Harvard
  • Read Now

About The Authors

Josh Lerner

Entrepreneurial Management
→More Publications

Ramana Nanda

Entrepreneurial Management
→More Publications

More from the Authors

    • June 2022
    • Review of Financial Studies

    The Use and Misuse of Patent Data: Issues for Finance and Beyond

    By: Josh Lerner and Amit Seru
    • April 2022
    • Faculty Research

    Shanghai Pudong Science and Technology Investment Co., Ltd.: December 2014

    By: Josh Lerner
    • March 2022
    • Faculty Research

    Hollie Haynes: An Unanticipated Crossroads

    By: Josh Lerner
More from the Authors
  • The Use and Misuse of Patent Data: Issues for Finance and Beyond By: Josh Lerner and Amit Seru
  • Shanghai Pudong Science and Technology Investment Co., Ltd.: December 2014 By: Josh Lerner
  • Hollie Haynes: An Unanticipated Crossroads By: Josh Lerner
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College