Business Angel and risk capital: the impact on innovation

The aim of the analysis is to understand if the risk capital carried by Business Angels (B.A.) could affect firms with high innovation propensity in creating more innovations than receiving risk capital from others financial operators. Innovation is a critical factor for the competitiveness of National System especially when the economy of the latter has come to maturity. For realizing “the successful exploitation of ideas, into new products, processes, services or business practices, and the critical process for achieving two complementary business goals of performance and growth, which in turn will help to close the productivity gap” (DTI’s Innovation Report, 2003, p. 8) firms have to understand which are the right competences to increase. In this context, the authors have developed a framework that measures the propensity to innovate in the firms. The model considers the firm‘s competences (grouped in four macro areas as Management; Organization; ITC; Marketing) to improve for creation, developing and diffusion of the innovation. The work is structured as an empirical analysis as follows: - the authors analyzed a sample of 12 business plans (choices for high level of innovation in their business) that received risk capital from B.A. and other financial operators; - for each firm their innovation propensity is measured through the author’s model during their start-up period ; - after a period of time (3 years), the authors checked if the firms with high innovation propensity have created real innovation and if a correlation exists between risk capital origin (from Business Angels or not) and innovation propensity. The conclusion of the work is the firms with B.A.’s risk capital have an high innovation propensity and create after a medium term period more innovation compared with the others.