Recessionary Filtering: The Impact of the Great Recession on Venture Capital Ecosystems and Innovation in Europe

Sammanfattning

This study examines the effects of the Great Recession (2007-2009) on venture capital (VC)-backed firms across the current EU member states. Through quantitative analysis, we assess how adverse macroeconomic conditions influenced initial funding sizes and long-term firm performance. Results suggest that firms financed during the recession secured larger initial investments, reflecting heightened VC selectivity. While evidence on long-term outcomes remains mixed, the findings are indicative of a recessionary filtering effect that yields higher-quality startups. We explore this topic further through literature and theory, evaluating the dynamic relationship of business cycles, innovation and economic growth. This research underscores VC's pivotal function in resource allocation and innovation, particularly during economic downturns.