Research Paper 30: Investment Screening and Venture Capital

In this paper, we examine the impact of investment screening on cross-border venture capital investment in Europe between 2007 and 2022. The underlying data is based on PRISM data extended by Eichenauer and Wang and combined with deal data from Preqin to analyze investment activity. Our results show unintended negative effects: Although the number of actual blocked deals remains very low, the associated uncertainty as well as the increase in transaction costs has led to a significant decline in cross-border investment. These effects are particularly strong for financial (i.e. "non-strategic") investors, for late-stage venture capital deals and for investors from non-OECD countries. We also observe changes in the size and structure of deals. These results have far-reaching policy implications for the financing of innovation in Europe.