The reallocation effects of COVID-19: Evidence from venture capital investments around the world

Andrea Bellucci; Alexander Borisov; Gianluca Gucciardi; Alberto Zazzaro

doi:10.1016/j.jbankfin.2022.106443

The reallocation effects of COVID-19: Evidence from venture capital investments around the world

J Bank Financ. 2023 Feb:147:106443. doi: 10.1016/j.jbankfin.2022.106443. Epub 2022 Feb 19.

Authors

Andrea Bellucci¹, Alexander Borisov², Gianluca Gucciardi³, Alberto Zazzaro⁴

Affiliations

¹ Department of Economics, Università degli Studi dell'Insubria, European Commission, Joint Research Centre (JRC), and MoFiR. Address: Via Monte Generoso 71, 21100 Varese (VA), Italy.
² Lindner College of Business, University of Cincinnati and MoFiR. Address: 2906 Woodside Drive, Cincinnati, OH 45221, USA.
³ European Commission, Joint Research Centre (JRC). Address: Via E. Fermi, 2749, 21027 Ispra VA, Italy.
⁴ Department of Economics and Statistics, University of Naples Federico II, CSEF, and MoFiR. Address: Via Cintia, 21, 80126, Naples, Italy.

Abstract

We examine possible reallocation effects generated by the COVID-19 outbreak by analyzing the patterns of venture capital (VC) investments around the globe. Using transaction-level data and exploiting the staggered nature of the spread of the virus, we document a shift in VC portfolios towards firms developing technologies relevant to an environment of social distancing and health pandemic concerns. A difference-in-differences analysis estimates significant increases in invested amount and number of deals in such areas. We show heterogenous effects related to the experience of VC investors, as well as their size and organizational form.

Keywords: COVID-19; Healthcare; Investment; Pandemic; Venture capital.