Navigating the Startup Landscape: The Social Impact of Venture Capital
DOI:
https://doi.org/10.57125/FS.2023.12.20.06Keywords:
venture capital infestations, financial marketing, creation of financial projects, economic growthAbstract
Over the past few decades, venture capital has become increasingly popular as an effective financing tool for high-risk start-ups compared to traditional financial instruments. A combination of scientific, technical, economic, environmental and social aspects is leading to positive developments in venture capital investment. As more and more venture capital is invested in startups, less and less attention is paid by investors to the social aspects of investing. The main goal of venture capitalists is to make profits in the long run. The purpose of the study was to analyze the social impact of venture capital in startups and its relationship with the economic impact of the investment. In order to achieve the research objective, the method of systematic literature review was identified as the most appropriate method according to the previously established inclusion criteria. The results of the study showed that the main aspect that is determinant in the venture capital investment process is the logic followed by investors at different institutional levels. The analysis analyzed and compared the logic that pursues the financial goals of the activity and the logic that pursues the social goals of the investors and the startup team. As a result of the study, it was possible to establish that venture capitalists have a contradiction between the commercial logic and the social logic of the startup's functioning. It was found that this aspect is predetermined by institutional aspects such as mission, values, management models and decision logics. The results of this study have both practical and scientific significance. Although in modern conditions it is possible to achieve success if measures to promote sustainable functioning are implemented comprehensively, touching social, environmental and economic aspects at the same time. The scientific significance of this study is to better understand the relationship between economic and social aspects of venture capital for start-ups. The practical relevance of this study is that for startup founders, the results of this study can be a basis for properly designing institutional aspects to better attract investors.
References
Agrawal, A., & Hockerts, K. (2019). Impact investing strategy: Managing conflicts between impact investor and investee social enterprise. Sustainability, 11(15), 4117. https://doi.org/10.3390/su11154117
Alakent, E., Goktan, M. S., & Khoury, T. A. (2020). Is venture capital socially responsible? Exploring the imprinting effect of VC funding on CSR practices. Journal of Business Venturing, 35(3), 106005. https://doi.org/10.1016/j.jbusvent.2020.106005
Andrusiv, U., Kinash, I., Cherchata, A., Polyanska, A., Dzoba, O., Tarasova, T., & Lysak, H. (2020). Experience and prospects of innovation development venture capital financing. Management Science Letters, 10(4), 781-788. https://doi.org/10.5267/j.msl.2019.10.019.
Babich, V., Marinesi, S., & Tsoukalas, G. (2021). Does crowdfunding benefit entrepreneurs and venture capital investors?. Manufacturing & Service Operations Management, 23(2), 508-524. https://doi.org/10.1287/msom.2019.0835
Bai, S., & Zhao, Y. (2021). Startup investment decision support: Application of venture capital scorecards using machine learning approaches. Systems, 9(3), 55. https://doi.org/10.3390/systems9030055
Bergmann, T., & Utikal, H. (2021). How to Support Start-Ups in Developing a Sustainable Business Model: The Case of an European Social Impact Accelerator. Sustainability, 13, 3337. https://doi.org/10.3390/su13063337
Block, J., Fisch, C., Vismara, S., & Andres, R. (2019). Private equity investment criteria: An experimental conjoint analysis of venture capital, business angels, and family offices. Journal of corporate finance, 58, 329-352. https://doi.org/10.1016/j.jcorpfin.2019.05.009
Bonini, S., & Capizzi, V. (2019). The role of venture capital in the emerging entrepreneurial finance ecosystem: future threats and opportunities. Venture Capital, 21(2-3), 137-175. https://doi.org/10.1080/13691066.2019.1608697
Cavallo, A., Ghezzi, A., Dell'Era, C., & Pellizzoni, E. (2019). Fostering digital entrepreneurship from startup to scaleup: The role of venture capital funds and angel groups. Technological Forecasting and Social Change, 145, 24-35. https://doi.org/10.1016/j.techfore.2019.04.022
Cheng, C., Hua, Y., & Tan, D. (2019). Spatial dynamics and determinants of sustainable finance: Evidence from venture capital investment in China. Journal of Cleaner Production, 232, 1148-1157. https://doi.org/10.1016/j.jclepro.2019.05.360
Demirel, P., Li, Q. C., Rentocchini, F., & Tamvada, J. P. (2019). Born to be green: new insights into the economics and management of green entrepreneurship. Small Business Economics, 52(4), 759–771. https://doi.org/10.1007/s11187-017-9933-z
Devigne, D., Manigart, S., Vanacker, T., & Mulier, K. (2019). Venture capital internationalization: Synthesis and future research directions. Contemporary Topics in Finance: A Collection of Literature Surveys, 215-248. https://doi.org/10.1002/9781119565178.ch8
Di Lorenzo, F., & Scarlata, M. (2019). Social enterprises, venture philanthropy and the alleviation of income inequality. Journal of Business Ethics, 159, 307-323. https://doi.org/10.1007/s10551-018-4049-1
Gompers, P. A., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2020). How do venture capitalists make decisions?. Journal of Financial Economics, 135(1), 169-190. https://doi.org/10.1016/j.jfineco.2019.06.011
Gompers, P. A., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2020). How do venture capitalists make decisions?. Journal of Financial Economics, 135(1), 169-190. https://doi.org/10.1016/j.jfineco.2019.06.011
Gornall, W., & Strebulaev, I. A. (2021). The economic impact of venture capital: Evidence from public companies. SSRN 2681841. https://doi.org/10.2139/ssrn.2681841
Harrison, R. T., & Mason, C. M. (2019). Venture Capital 20 years on: reflections on the evolution of a field. Venture Capital, 21(1), 1-34. https://doi.org/10.1080/13691066.2019.1562627
Hegeman, P. D., & Sørheim, R. (2021). Why do they do it? Corporate venture capital investments in cleantech startups. Journal of Cleaner Production, 294, 126315. https://doi.org/10.1016/j.jclepro.2021.126315
Holtslag, M., Chevrollier, N., & Nijhof, A. (2021). Impact investing and sustainable market transformations: The role of venture capital funds. Business Ethics, the Environment & Responsibility, 30(4), 522-537. https://doi.org/10.1111/beer.12371
Hong, S., Serfes, K., & Thiele, V. (2020). Competition in the venture capital market and the success of startup companies: Theory and evidence. Journal of Economics & Management Strategy, 29(4), 741-791. https://doi.org/10.1111/jems.12394
Kroezen, J. J., & Heugens, P. P. (2019). What is dead may never die: Institutional regeneration through logic reemergence in Dutch beer brewing. Administrative Science Quarterly, 64(4), 976-1019. https://doi.org/10.1177/0001839218817520
Lerner, J., & Nanda, R. (2020). Venture capital’s role in financing innovation: What we know and how much we still need to learn. Journal of Economic Perspectives, 34(3), 237-261. https://doi.org/10.1257/jep.34.3.237
Linnenluecke, M. K., Marrone, M., & Singh, A. K. (2020). Conducting systematic literature reviews and bibliometric analyses. Australian Journal of Management, 45(2), 175-194. https://doi.org/10.1177/0312896219877678
Ma, S. (2020). The life cycle of corporate venture capital. The Review of Financial Studies, 33(1), 358-394. https://doi.org/10.1093/rfs/hhz042
Mrkajic, B., Murtinu, S., & Scalera, V. G. (2019). Is green the new gold? Venture capital and green entrepreneurship. Small business economics, 52, 929-950. https://doi.org/10.1007/s11187-017-9943-x
Nanda, R., Samila, S., & Sorenson, O. (2020). The persistent effect of initial success: Evidence from venture capital. Journal of Financial Economics, 137(1), 231-248. https://doi.org/10.1016/j.jfineco.2020.01.004
Page, M. J., Moher, D., Bossuyt, P. M., Boutron, I., Hoffmann, T. C., Mulrow, C. D., ...& McKenzie, J. E. (2021). PRISMA 2020 explanation and elaboration: updated guidance and exemplars for reporting systematic reviews. BMJ, 372. https://www.bmj.com/content/372/bmj.n160
Pandher, G. (2021). The performance of venture capital investments: Failure risk, valuation uncertainty & venture characteristics. Quantitative Finance, 21(6), 929-943. https://doi.org/10.1080/14697688.2020.1854479
Piacentino, G. (2019). Venture capital and capital allocation. The Journal of Finance, 74(3), 1261-1314. https://doi.org/10.1111/jofi.12756
Sarkis-Onofre, R., Catalá-López, F., Aromataris, E., & Lockwood, C. (2021). How to properly use the PRISMA Statement. Systematic Reviews, 10(1), 1-3. https://doi.org/10.1186/s13643-021-01671-z
Schnitzer, M., & Watzinger, M. (2022). Measuring the spillovers of venture capital. Review of Economics and Statistics, 104(2), 276-292. https://doi.org/10.1162/rest_a_00937
Statista. (2023, December 18). Venture capital worldwide - statistics & facts. URL: https://www.statista.com/topics/4724/venture-capital-worldwide/#topicOverview
Tekula, R., & Andersen, K. (2019). The role of government, nonprofit, and private facilitation of the impact investing marketplace. Public Performance & Management Review, 42(1), 142-161. https://doi.org/10.1080/15309576.2018.1495656
UN SDGs (2023, November 12). UN Sustainable Development Goals—Knowledge Platform. URL: https://sustainabledevelopment.un.org/sdgs
Volkmann, C., Fichter, K., Klofsten, M., & Audretsch, D. B. (2019). Sustainable entrepreneurial ecosystems: An emerging field of research. Small Business Economics, 56(3), 1047-1055. https://doi.org/10.1007/s11187-019-00253-7
Wang, S., Wareewanich, T., & Chankoson, T. (2023). Factors influencing venture capital perforsmance in emerging technology: The case of China. International Journal of Innovation Studies, 7(1), 18-31. https://doi.org/10.1016/j.ijis.2022.08.004
Xiao, Y., & Watson, M. (2019). Guidance on conducting a systematic literature review. Journal of planning education and research, 39(1), 93-112. https://doi.org/10.1177/0739456X17723971
Yan, S., Ferraro, F., & Almandoz, J. (2019). The rise of socially responsible investment funds: The paradoxical role of the financial logic. Administrative Science Quarterly, 64(2), 466-501. https://doi.org/10.1177/000183921877332
Yang, S., Kher, R., & Newbert, S. L. (2020). What signals matter for social startups? It depends: The influence of gender role congruity on social impact accelerator selection decisions. Journal of Business Venturing, 35(2), 105932. https://doi.org/10.1016/j.jbusvent.2019.03.001
Zhang, Y. (2021). Impact investing and venture capital industry: Experimental evidence. SSRN, 3959117. URL: https://abfer.org/media/abfer-events-2023/annual-conference/papers-sustainablegreenfinance/AC23P8036-Impact-Investing-and-Venture-Capital-Industry-Experimental-Evidence.pdf
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 author
This work is licensed under a Creative Commons Attribution 4.0 International License.