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‘Cleantech’ venture capital around the world

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  • Cumming, Douglas
  • Henriques, Irene
  • Sadorsky, Perry
Abstract
Cleantech venture capital investment differs from the typical venture capital investment in that it tends to be very capital intensive and faces greater technology risks associated with the functioning of the technology, scalability and exit requirements than the typical venture capital investment. Moreover, unlike the typical venture capital investment, the benefits arising from cleantech cannot be totally captured by the venture capitalist as many of its benefits accrue to society via reduced environmental degradation and better health and quality of life outcomes. The public goods literature posits that such externalities reduce investment in cleantech below the socially optimal level. We seek to determine whether there are countervailing factors which may incite greater cleantech investment. We argue that oil prices, increased stakeholder attention, as well as the impact of various formal and informal institutions are such factors. This paper provides a cross-country analysis of the determinants of cleantech venture capital investment with a unique worldwide dataset of 31 countries spanning 1996–2010. The data show consistent evidence of a pronounced role for oil prices in driving cleantech venture capital deals, which is more important than other economic, legal or institutional variables. Cleantech media coverage is likewise a statistically significant determinant of cleantech venture capital investment and as economically significant as other country level legal, governance, and cultural variables. Uncertainty avoidance has a negative impact on cleantech venture capital investment, as well as a moderating effect on other variables.

Suggested Citation

  • Cumming, Douglas & Henriques, Irene & Sadorsky, Perry, 2016. "‘Cleantech’ venture capital around the world," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 86-97.
    • Handle: RePEc:eee:finana:v:44:y:2016:i:c:p:86-97
    DOI: 10.1016/j.irfa.2016.01.015
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    Cited by:

    1. Jie Ren & Jar-Der Luo & Ke Rong, 2020. "How Do Venture Capitals Build Up Syndication Ecosystems for Sustainable Development?," Sustainability, MDPI, vol. 12(11), pages 1-14, May.
    2. Soh Young In & Ashby H. B. Monk & Janelle Knox-Hayes, 2020. "Financing Energy Innovation: The Need for New Intermediaries in Clean Energy," Sustainability, MDPI, vol. 12(24), pages 1-25, December.
    3. Linnenluecke, Martina K. & Han, Jianlei & Pan, Zheyao & Smith, Tom, 2019. "How markets will drive the transition to a low carbon economy," Economic Modelling, Elsevier, vol. 77(C), pages 42-54.
    4. Maksim Belitski & Rosa Caiazza & Erik E. Lehmann, 2021. "Knowledge frontiers and boundaries in entrepreneurship research," Small Business Economics, Springer, vol. 56(2), pages 521-531, February.
    5. Vismara, Silvio, 2019. "Sustainability in equity crowdfunding," Technological Forecasting and Social Change, Elsevier, vol. 141(C), pages 98-106.
    6. Vilija Aleknevičien&# & Asta Bendoraityt&#, 2023. "Role of Green Finance in Greening the Economy: Conceptual Approach," Central European Business Review, Prague University of Economics and Business, vol. 2023(2), pages 105-130.
    7. Köppl-Turyna, Monika & Köppl, Stefan & Christopulos, Dimitris, 2023. "How to support cleantech start-ups? Lessons from European venture-capital deals," Research Papers 25, EcoAustria – Institute for Economic Research.
    8. repec:fst:rfsisf:v:8:y:2023:i:15:p:144-158 is not listed on IDEAS
    9. Polzin, Friedemann, 2017. "Mobilizing private finance for low-carbon innovation – A systematic review of barriers and solutions," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 525-535.
    10. Lohwasser, Todor S., 2020. "Meta-analyzing the relative performance of venture capital-backed firms," Discussion Papers of the Institute for Organisational Economics 4/2020, University of Münster, Institute for Organisational Economics.
    11. Polzin, Friedemann & Egli, Florian & Steffen, Bjarne & Schmidt, Tobias S., 2019. "How do policies mobilize private finance for renewable energy?—A systematic review with an investor perspective," Applied Energy, Elsevier, vol. 236(C), pages 1249-1268.
    12. Cumming, Douglas & Zhang, Yelin, 2016. "Alternative investments in emerging markets: A review and new trends," Emerging Markets Review, Elsevier, vol. 29(C), pages 1-23.
    13. Anthony M Levenda & Eliot Tretter, 2020. "The environmentalization of urban entrepreneurialism: From technopolis to start-up city," Environment and Planning A, , vol. 52(3), pages 490-509, May.
    14. Cumming, Douglas J. & Leboeuf, Gael & Schwienbacher, Armin, 2017. "Crowdfunding cleantech," Energy Economics, Elsevier, vol. 65(C), pages 292-303.
    15. Ekaterina Turkina & Boris Oreshkin, 2021. "The Impact of Co-Inventor Networks on Smart Cleantech Innovation: The Case of Montreal Agglomeration," Sustainability, MDPI, vol. 13(13), pages 1-17, June.
    16. Luca Grilli & Boris Mrkajic & Gresa Latifi, 2018. "Venture capital in Europe: social capital, formal institutions and mediation effects," Small Business Economics, Springer, vol. 51(2), pages 393-410, August.
    17. Andreea Larisa Olteanu (Burcă) & Alina Elena Ionașcu, 2023. "Navigating the ESG Landscape and Its Impact in the Business and Investment Sector," Journal of Financial Studies, Institute of Financial Studies, vol. 15(8), pages 144-158, November.
    18. Chen Zhang & Xinghua Dang & Tao Peng & Chaokai Xue, 2019. "Dynamic Evolution of Venture Capital Network in Clean Energy Industries Based on STERGM," Sustainability, MDPI, vol. 11(22), pages 1-25, November.

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    More about this item

    Keywords

    Venture Capital; Cleantech; Governance; Uncertainty avoidance; Law and finance;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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