Working Paper: NBER ID: w27828
Authors: Ufuk Akcigit; Sina T. Ates; Josh Lerner; Richard R. Townsend; Yulia Zhestkova
Abstract: The treatment of foreign investors is a contentious topic in U.S. entrepreneurship policy. We model a setting where foreign corporate investments in Silicon Valley may allow U.S. entrepreneurs to pursue technologies that they could not otherwise, but may also lead to knowledge spillovers. We show that despite the benefits from such inbound investments for U.S. firms, it may be optimal for the U.S. government to raise their costs to deter these investments. Using as comprehensive as possible a sample of investments by foreign corporate investors in U.S. startups, we find evidence consistent with the presence of knowledge spillovers to foreign investors.
Keywords: Venture Capital; Foreign Investment; Technology Spillovers; National Security
JEL Codes: G24; O33; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign corporate venture capital investments in U.S. startups (F23) | increased patenting activity in the technology classes relevant to the startups (O31) |
| foreign corporate venture capital investments in U.S. startups (F23) | knowledge spillover effect (O36) |
| foreign corporate venture capital investments in U.S. startups (F23) | enhanced innovation capabilities of foreign investor (O36) |
| investments from foreign corporations (especially from China) (F23) | knowledge spillovers (O36) |
| more foreign investments in specific technology classes (F20) | increased patenting by U.S. startups in those classes (O39) |
| foreign investments (F21) | potential national security risks (F52) |
| foreign investments (F21) | policymakers considering raising costs for foreign investments (F21) |