The role of human capital and gender parity in funding venture capital businesses

Abstract

Which factors guide investors in the decision of investing in a new venture? The intangible determinants of venture capital investment have been studied scarcely by the literature, especially from a macro cross-country perspective. Very few studies have included education proxies of human capital in the analysis (Grilli et al., 2019). The present study explores whether including business education topics (i.e., how to create and manage an SME) in school programs benefits a country in attracting more venture capital investments and/or increasing the number of deals. Additionally, it compares the impacts of providing this specific business education at different educational levels against raising the general alphabetization level of a country, to generate a discussion on which of these two measures could be more effective to increase a country’s competitive advantage. Finally, it studies whether the extent to which women are active in the labor force and completed different levels of education also has a role in attracting venture capital funding. The sample comprises 36 countries (32 OECD countries plus Bulgaria, Romania, Russia, and South Africa) over 20 years (2002-2021). The model used is a panel-corrected standard error (PCSE) model with time fixed effect. Results show that both task-related education and a reduced gender gap have a positive and significant effect on venture capital investment and on the number of deals, suggesting that future studies could include these variables to further test their role in promoting the economic growth of countries.