The effects of venture capital investments on industrial innovative opportunities and technological arbitrage opportunities

This study investigates how venture capital (VC) investments flowing into an industry impact both the innovative opportunities and technological arbitrage opportunities presented in the industry. After examining 855 industry-year observations for 45 industries in the USA for 1997–2015, we found that VC investments moderate the effects of new venture entry rates on innovative opportunities and technological arbitrage opportunities at the industry level. Additionally, industry concentration and industry dynamism influence the moderating effects of VC investments on the relationships between new venture entry rates and both types of entrepreneurial opportunities. Our study not only contributes to the growing research on innovative opportunities and technological arbitrage opportunities, it also provides managerial implications for both entrepreneurial companies and policymakers. Three-way impacts of new venture entry, VC investments, and industry characteristics on entrepreneurial opportunities are examined. Innovative opportunities and technological arbitrage opportunities are two primary types of entrepreneurial opportunities that contribute to technological progress and eventually lead to economic growth. In this study, we investigate whether entrepreneurial activities, such as new venture entry into an industry, influence these two opportunities in 45 industries in the USA, and how the impacts of new venture entry may vary in different external conditions. Our findings show that the effects of new venture entry rates on innovative opportunities and technological arbitrage opportunities may be contingent upon the availability of resources such as VC investments flowing into the industry. Additionally, our findings reveal that the interaction effects of new venture entry rates and VC investments vary among industries with different characteristics. Thus, entrepreneurs and policymakers should carefully consider industry conditions such as concentration and dynamism when attempting to attract VC investments into their firms or industries, rather than the more the better.