The Bank of Italy has published a study in its Markets, Infrastructures, Payment Systems series examining how private equity investment relates to innovation by euro area firms. Using data on private equity deals, patent applications and firm characteristics across eight euro area countries from 2010 to 2019, the paper finds that firms receiving private equity funding tend to increase patenting activity, with the effect more pronounced for venture capital investments. By contrast, the study finds no empirical link between private equity investment and green innovation. The analysis shows that more than half of firms receiving private equity increased their share of patenting activity after investment, with an average increase of about 43 percent, and that the positive relationship is driven mainly by venture capital rather than other forms of private equity. The paper also cautions that the relationship may partly reflect selection effects, as more innovative firms may be better able to attract private equity funding, meaning investors may act as catalysts that amplify existing innovation potential. For green technologies, the study finds the evidence inconclusive and points to structural barriers such as high risk, long development cycles and limited upside during the sample period as possible constraints on private equity's role.
Bank of Italy2026-07-08
Bank of Italy publishes study linking venture capital to stronger euro area patenting but not green innovation
The Bank of Italy has published a study finding that private equity-backed euro area firms increased patenting activity between 2010 and 2019, with the strongest effect associated with venture capital. The paper also says innovative firms may be more likely to attract private equity in the first place. It finds no empirical link between private equity investment and green innovation.