Publication Type

Working Paper

Version

publishedVersion

Publication Date

7-2025

Abstract

How do advanced technology adoption and venture capital (VC) funding impact employment and growth? An analysis of data from the US Census Bureau suggests that while both advanced technology use and VC funding matter on their own for firm outcomes, their joint presence is most strongly correlated with higher employment levels. VC presence is linked with a high increase in employment, though primarily among a limited subset of firms. In contrast, technology adoption is associated with a smaller rise in employment, yet it influences a considerably larger number of firms. A model of startups is created, focusing on decisions to use advanced technology and seek VC funding. The model is compared with firm-level data on employment, advanced technology use, and VC investment. Several thought experiments are conducted using the model. Some experiments assess the importance of advanced technology and VC in the economy. Others examine the reallocation effects across firms with different technology choices and funding sources in response to shifts in taxes and subsidies.

Keywords

Advanced technology, banks, capital gains taxation, corporate income taxation, difference-in-difference analysis, employment, firm-level data, reallocation effects, startups, subsidies, synergy, venture capital, technology adoption, US Census data

Discipline

Growth and Development | Labor Economics

Research Areas

Applied Microeconomics

Publication

SMU Economics and Statistics Working Paper Series, No. 07-2025

First Page

1

Last Page

54

Publisher

Singapore Management University

City or Country

Singapore

Embargo Period

7-28-2025

Copyright Owner and License

Authors

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