THE IMPACT OF VENTURE CAPITAL ON ECONOMIC GROWTH IN THE UNITED STATES
The purpose of this research is to assess the effects of venture capital on economic growth in the United States. One point of focus in this assessment is the role of venture capital-backed internet start-up companies on economic growth in the contemporary period.
It is necessary to define two terms, as these terms are used in this research. The two terms are "venture capital" and "economic growth."
The term "venture capital," as the term is used in this research, is defined as investments in "young companies, ranging from start-up firms to developed businesses preparing to initially offer their stock in the public market" (Sharpe, Alexander, & Bailey, 1999). This definition does not, however, exclude repeated investments by venture capitalists in the same firm.
The term "economic growth," as the term is used in this research, is defined in positive terms as the rate of change in gross domestic product (GDP). Within this definition, a decline in GDP would be referred to as negative growth. There are two general types of economic growth. Extensive economic growth refers to an expansion of the total output of goods and services, regardless of the change in per capita output. Intensive economic growth refers to an increase in per capita output (Ekelund & HTbert, 1991). Extensive economic growth is the focus in this research. Because economic growth refers to changes in the GDP, the rate of growth of the economic output of venture capital-backed firms is only important indirectly. The factors of greater importance within the context of the purpose of this research are (1) the aggregate growth of venture capital-back firms as a proportion of total GDP growth in the economy of the United States, and (2) the extent to which economic growth generated by venture capital-backed firms is long-term in character, as opposed to being a transitory phenomenon.<...