Biotechnology firms, signals, and venture capital investment

Purpose: Biotechnology has gained such prominence in the past years that approximately 50% of new drugs developed worldwide are of biotechnological origin. Some of the Covid-19 vaccines are a good example of this development. However, biotechnology R&D projects are characterized by high cost...

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Autores: Solé Udina, Ernest, Domingo Pérez, Susana, Amat Salas, Oriol
Formato: artículo
Estado:Versión publicada
Fecha de publicación:2022
País:España
Recursos:Universitat Pompeu Fabra
Repositorio:Repositorio Digital de la UPF
OAI Identifier:oai:repositori.upf.edu:10230/58369
Acesso em linha:http://hdl.handle.net/10230/58369
http://dx.doi.org/10.3926/ic.1978
Access Level:acceso abierto
Palavra-chave:Probit with panel data
Financing
Information asymmetry
Signalling
Venture capital
Biotechnology
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spelling Biotechnology firms, signals, and venture capital investmentSolé Udina, ErnestDomingo Pérez, SusanaAmat Salas, OriolProbit with panel dataFinancingInformation asymmetrySignallingVenture capitalBiotechnologyPurpose: Biotechnology has gained such prominence in the past years that approximately 50% of new drugs developed worldwide are of biotechnological origin. Some of the Covid-19 vaccines are a good example of this development. However, biotechnology R&D projects are characterized by high costs, prolonged development times, and a high degree of uncertainty and failure. Only few types of financial agents undertake such risky investments, among which are venture capital firms. In this paper, we analyse the signals that influence suchlike venture capital investment decisions. The very high level of risk, which differentiates biotechnology firms from other technology companies, justifies an analysis focused solely on biotechnology firms. Design/methodology: Hypotheses about the effectiveness of these signals are validated by means of a probit regression with panel data on a sample of 210 biotechnology companies established in Spain over a ten-year period. Findings: A positive and negative signalling effect has been found for some of the phenomena analysed, which validate the proposed model. Research limitations/implications: A convenience sample has been used for methodological reasons. Some phenomena that could have some effect on the venture capital investment decisions have not been possible to observe. Practical implications: It can be crucial for biotechnology firms for their managers to know which characteristics make these firms attractive to venture capital firms. Additionally, it is important to be aware of signals that, instead of favouring investment decisions, deter them. Originality/value: This is the first study conducted for the Spanish industry to focus on the first venture capital investment – rather than the typical focus on the amount invested- as an event that mitigates the information asymmetry level, and which includes also a distinction between four types of strategic alliance, the use of a probit regression with panel data, and a quantitative analysis on the biotech industry. As the Spanish biotechnology and venture capital industries differ from those established in other European countries, this work offers new elements of analysis, description, and comparison of these industries. In addition, the construction of a database on a sample of 210 Spanish biotechnology firms is unprecedented and can be used for future research.OmniaScience202320232022info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionapplication/pdfapplication/pdfhttp://hdl.handle.net/10230/58369http://dx.doi.org/10.3926/ic.1978reponame:Repositorio Digital de la UPFinstname:Universitat Pompeu FabraInglésIntangible Capital. 2022;18(3):350-69This work is licensed under a Creative Commons Attribution 4.0 International License.http://creativecommons.org/licenses/by-nc/4.0/info:eu-repo/semantics/openAccessoai:repositori.upf.edu:10230/583692026-06-12T07:21:37Z
dc.title.none.fl_str_mv Biotechnology firms, signals, and venture capital investment
title Biotechnology firms, signals, and venture capital investment
spellingShingle Biotechnology firms, signals, and venture capital investment
Solé Udina, Ernest
Probit with panel data
Financing
Information asymmetry
Signalling
Venture capital
Biotechnology
title_short Biotechnology firms, signals, and venture capital investment
title_full Biotechnology firms, signals, and venture capital investment
title_fullStr Biotechnology firms, signals, and venture capital investment
title_full_unstemmed Biotechnology firms, signals, and venture capital investment
title_sort Biotechnology firms, signals, and venture capital investment
dc.creator.none.fl_str_mv Solé Udina, Ernest
Domingo Pérez, Susana
Amat Salas, Oriol
author Solé Udina, Ernest
author_facet Solé Udina, Ernest
Domingo Pérez, Susana
Amat Salas, Oriol
author_role author
author2 Domingo Pérez, Susana
Amat Salas, Oriol
author2_role author
author
dc.subject.none.fl_str_mv Probit with panel data
Financing
Information asymmetry
Signalling
Venture capital
Biotechnology
topic Probit with panel data
Financing
Information asymmetry
Signalling
Venture capital
Biotechnology
description Purpose: Biotechnology has gained such prominence in the past years that approximately 50% of new drugs developed worldwide are of biotechnological origin. Some of the Covid-19 vaccines are a good example of this development. However, biotechnology R&D projects are characterized by high costs, prolonged development times, and a high degree of uncertainty and failure. Only few types of financial agents undertake such risky investments, among which are venture capital firms. In this paper, we analyse the signals that influence suchlike venture capital investment decisions. The very high level of risk, which differentiates biotechnology firms from other technology companies, justifies an analysis focused solely on biotechnology firms. Design/methodology: Hypotheses about the effectiveness of these signals are validated by means of a probit regression with panel data on a sample of 210 biotechnology companies established in Spain over a ten-year period. Findings: A positive and negative signalling effect has been found for some of the phenomena analysed, which validate the proposed model. Research limitations/implications: A convenience sample has been used for methodological reasons. Some phenomena that could have some effect on the venture capital investment decisions have not been possible to observe. Practical implications: It can be crucial for biotechnology firms for their managers to know which characteristics make these firms attractive to venture capital firms. Additionally, it is important to be aware of signals that, instead of favouring investment decisions, deter them. Originality/value: This is the first study conducted for the Spanish industry to focus on the first venture capital investment – rather than the typical focus on the amount invested- as an event that mitigates the information asymmetry level, and which includes also a distinction between four types of strategic alliance, the use of a probit regression with panel data, and a quantitative analysis on the biotech industry. As the Spanish biotechnology and venture capital industries differ from those established in other European countries, this work offers new elements of analysis, description, and comparison of these industries. In addition, the construction of a database on a sample of 210 Spanish biotechnology firms is unprecedented and can be used for future research.
publishDate 2022
dc.date.none.fl_str_mv 2022
2023
2023
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/10230/58369
http://dx.doi.org/10.3926/ic.1978
url http://hdl.handle.net/10230/58369
http://dx.doi.org/10.3926/ic.1978
dc.language.none.fl_str_mv Inglés
language_invalid_str_mv Inglés
dc.relation.none.fl_str_mv Intangible Capital. 2022;18(3):350-69
dc.rights.none.fl_str_mv This work is licensed under a Creative Commons Attribution 4.0 International License.
http://creativecommons.org/licenses/by-nc/4.0/
info:eu-repo/semantics/openAccess
rights_invalid_str_mv This work is licensed under a Creative Commons Attribution 4.0 International License.
http://creativecommons.org/licenses/by-nc/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv OmniaScience
publisher.none.fl_str_mv OmniaScience
dc.source.none.fl_str_mv reponame:Repositorio Digital de la UPF
instname:Universitat Pompeu Fabra
instname_str Universitat Pompeu Fabra
reponame_str Repositorio Digital de la UPF
collection Repositorio Digital de la UPF
repository.name.fl_str_mv
repository.mail.fl_str_mv
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