This paper proposes a conceptual framework based on both environmental and industrial factors that could explain, in aggregated terms, capital flows within venture capital and private equity markets. The interaction between supply and demand is directly affected by three conditions: the size of the domestic market, the accessibility of a stock market for growing companies and the entrepreneurial environment. Evidence is found on the significant impact of all three conditions on the aggregated commitments to venture capital and private equity organizations in a panel of sixteen European countries. Prior to its inclusion in our model, we find evidence of the impact that several instruments related to the entrepreneurial environment exert on investments.
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