Venture capital in the UK: A regional deal?

In this thesis we examine the organisation of the UK venture capital industry. We draw on literature from finance, innovation and economic geography in order to build a model to understand the relationship between the distribution of investment and regional resources. Using network theory we then extend this model in order to understand the structure of ties between actors in the venture capital investment process. Thus, we analyse the relationship between regional venture capital activity in the UK and a range of relevant regional resources. The thesis argues that patterns of investment activity in the UK are well established, with well defined regional concentrations, resulting from the geographically-embedded nature of venture capital. However, at a sector level, regional relationships between local resources and investment vary. We find that investment in biotechnology is less regionally embedded and strongly influenced by changes in local resources, such as R&D. Although we demonstrate venture capital networks operate at a national level, our network analysis shows that regional variations persist in the strength and quality of relationships between investors and entrepreneurial directors. Consistent with a regionally embedded venture capital industry, and in agreement with social capital theory, our analysis indicates distinctive regional network patterns which support local investment activity. This thesis supports a regional innovation systems approach where the investor plays an important role in defining the system. However, we emphasise that individual regions may adopt different systems with regards to the presence and operation of venture capital, as a result of the distinctive characteristics of each region, their history, proximity to London and the structure of social networks. We suggest that policy can play a role in supporting these systems if it is sensitive to the variation in regional dynamics and takes account of access to entrepreneurial resources located outside the region