Who creates jobs? Venture capital, research grants, and regional employment in the U.S.

ABSTRACT

We build on the exploratory and exploitative learning literature that suggests that venture capital and governmental research grants may impact regional employment in a different manner. Using a regional employment dataset in the U.S. (United States) medical device sector, our analysis reveals that research grants contribute to create a greater level of regional employment compared with venture capital funding. Furthermore, the positive effects of both funding sources are more salient when intellectual capital is abundant in the region. More specifically, the interaction effect of research grants and intellectual capital is gradually increased in the long term and eventually becomes greater than that of venture capital and intellectual capital, which is relatively constant. These findings highlight the heterogeneous motivations and consequences of two funding sources that should be considered in the future resource allocation policy accordingly.

KEYWORDS:

• Employment
• venture capital
• research grant
• intellectual capital
• medical device

JEL CLASSIFICATION:

• G24
• L26
• O38
• R10

Acknowledgments

ERE is supported in part by a grant (R01 GM 49039) from the National Institutes of Health. DNK is supported in part by the L.P. Huang Chair for Engineering Entrepreneurship. We thank Institute for Strategy and Competitiveness at Harvard University for their assistance and generous access to data. We also thank Matthew Higgins, Henry Sauermann, Diana Hicks, John Walsh, Jerry Thursby, Frank Rothaermel, seminar participants at Georgia Institute of Technology, and conference participants at Atlanta Conference on Science and Innovation Policy at Atlanta, GA, the Academy of Business Research International Conference at Atlantic City, NJ, and Atlanta Competitive Advantage Conference at Atlanta, GA for helpful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.