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Browsing by Author "Mollgren, Satu"

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  • Mollgren, Satu (2013)
    Innovations are seen as the main contributor to economic growth. Despite the fact that innovation is central to the modern theories of growth and development, the knowledge of innovation and the microprocesses affecting macroeconomic growth is still lacking. This thesis examines the entrepreneurial innovation process and innovation commercialization. The literature review of this thesis indicates that without a successful development and commercialization process, the innovations would never access the product market or at least they would only stay there for a short period of time failing to give a positive return on invest for the innovative firms. The commercialization process adds value to the firms, end-users and economics as a whole. The purpose of this thesis is to open the role of venture capitalists in the innovation process. In addition to financing, the role of the venture capitalists is to support the commercialization process of the venture-backed companies. The role of the venture capitalist in the innovation process is explained with the help of a model shown by Norbäck and Persson in their paper The Organization of the Innovation Industry: Entrepreneurs, Venture Capitalists and Oligopolists (2009). In this entrepreneurial innovation process, the basic innovation is acquired by an incumbent firm or a venture-backed company is formed. The commercialization is performed after the investment. According to the model, venture capital industry increases the amount of innovation in the economy. Venture capitalists enhance the incentives to innovate by raising the price paid for an invention. The venture-backed company also has interests to develop the products further than incumbent firms if the developed innovation is sold to an incumbent company in an auction. This is because the incumbent firm wants to prevent the rivals from getting the developed innovation and the auction setting increases the price paid for the innovation. In conclusion, spillovers generate economic growth. As innovation and innovation development produce spillovers, the venture capitalists have a positive impact on economic growth through these factors.