Research pick: Economics between crises - "The impact of GDP and governance on venture capital investments for the period 2010–2019 (after the financial crisis and before the Covid-19 pandemic)"

Wars and geological disasters aside, two major crises have affected world economies acutely so far this century – the international financial crisis that peaked around 2010 and the COVID-19 pandemic which emerged a decade later. Research in the International Journal of Teaching and Case Studies, has looked at how governance and gross domestic product (GDP) during the period 2010 to 2019 affected the level of venture capital investment after the financial crises and before the pandemic.

Sebastian Schaefer, Felix Ashu, and Michael Neubert of the ISM International School of Management in Paris, France, suggest in their paper that politicians, investors, and entrepreneurs need to have a clearer understanding of the factors that affect total venture capital investments, without it they cannot facilitate economic growth. The received wisdom is that developed and well-governed countries attract greater investment, but there is a dearth of research evidence to support this assumption quantitatively.

As such, the team has looked at the period 2010 to 2019 and looked at how governance indicators are correlated with GDP across 25 developed European nations. By choosing this period the findings might be to some degree independent of the two major factors that affected global economics before and after the period in question and so could offer a general finding. A multiple regression analysis allowed them to extract new insights but also revealed a mix of effects between countries and so generalisations are difficult to make. Moreover, the team could explain the mixed findings of earlier work better through their own analysis. However, they do offer that overall “a certain minimal level of political governance has an impact on venture capital investments.”

The team proposes that future work will need to increase the sample size and cluster countries into groups. This, they suggest, might allow them to come to more general conclusions regarding each variable considered and the effect it has on venture capital investments.

Schaefer, S., Ashu, F. and Neubert, M. (2021) ‘The impact of GDP and governance on venture capital investments for the period 2010–2019 (after the financial crisis and before the Covid-19 pandemic)’, Int. J. Teaching and Case Studies, Vol. 12, No. 3, pp.219–232.