Venture Capital as a Driver of Labor Market Performance - An Examination of its Impact on Employment and Labor Costs

Sammanfattning: Venture capital has been widely recognized to have the potential to promote an economy's growth and competitive position through driving innovation, productivity and job creation, both in certain regions and in countries as a whole. In light of Europe's urgent problems of persistent unemployment and lack of competitiveness, we aim to further investigate how venture capital affects employment and labor costs at an industry level, circumventing potential biases from firm level studies while allowing for more differentiation than research conducted at a country level. We examine the impact of venture capital investments on employment and labor costs across 21 industries in the EU-15 countries between 1995 and 2009. Employing multiple OLS and GLS regression specifications, we find that venture capital raises employment as well as labor costs in receiving industries. This suggests that venture capital has the potential to attract and develop a highly skilled and competitive labor force and may be a driver of employment in entire industries. However, the problem of reverse causality must be borne in mind.