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Stepping Up Venture Capital to Finance Innovation in Europe
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Stepping Up Venture Capital to Finance Innovation in Europe

Nathaniel Arnold, Guillaume Claveres and Jan Frie
IMF, 2024
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Editorial Rating

8

Qualities

  • Analytical
  • Overview
  • Visionary

Recommendation

Venture capital promotes innovation and research which, in turn, boost economic development. Yet at both the national and supranational levels, venture capital investing lags in the European Union. IMF professionals Nathaniel Arnold, Guillaume Claveres, and Jan Frie explore the disadvantages of different tax and regulatory regimes and of less developed capital markets in promoting venture financing. They suggest incentives for greater investment by institutions and individuals. Financial professionals will find this a useful analysis.

Summary

The venture capital business is underdeveloped in the European Union.

The venture capital industry in the European Union averages 0.2% of GDP versus 0.7% in the United States. Europe boasts fewer VC funds as well. Universities, research centers, and technology firms are critical sources of innovation.

Differences in law, taxation, and regulation affect the economies of EU member states and their ability to integrate. Product and labor markets vary, making expansion cumbersome and expensive. Banks have historically played a large role in the EU financial system, and capital markets are smaller as a result. Assets in private pension and insurance ...

About the Authors

Nathaniel Arnold, Guillaume Claveres, and Jan Frie are with the IMF.

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