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Analysis Group affiliate and Harvard Business School Professor Joshua Lerner has released a white paper analyzing the effects of copyright decisions in the European Union on venture capital investment. The research builds on his previous work examining how changes in electronic privacy and copyright policy have affected venture capitalists’ willingness to invest in new technologies.

In “The Impact of Copyright Policy Changes in France and Germany on Venture Capital Investment in Cloud Computing Companies,” Professor Lerner analyzes how copyright decisions in France and Germany affected VC investment in cloud computing in those countries compared to similar investment in other EU countries. The findings suggest that decisions around the scope of copyrights can have significant impacts on investment and innovation.

Supported by an Analysis Group team that included Managing Principal Lau Christensen and Manager Greg Rafert, Professor Lerner constructed a data set reflecting VC investment in cloud computing companies. He estimated multiple “difference-in-difference” regression models designed to test for a statistically significant decrease in VC investment in French and German cloud computing firms after various French and German court rulings. (These econometric models measure the impact of an event at a given period in time, controlling for other factors.)

The court rulings – a November 2008 decision on Wizzgo, an online video recording service, by the Tribunal de Grande Instance de Paris in France, and several court rulings regarding Shift.tv and Save.tv in Germany – were widely seen as impediments to the development of cloud computing technologies. The team hypothesized that those decisions would lead to decreased VC investment in cloud computing in France and Germany relative to other countries in the EU – a view that was confirmed: The team found that the rulings led to an average reduction in VC investment in French and German cloud computing firms of $4.6 and $2.8 million per quarter, respectively, implying a total decrease in French and German VC investment of $87 million from the time these decisions were handed down through the end of 2010.

Read the new white paper 

Read the related research paper “The Impact of Copyright Policy Changes on Venture Capital Investment in Cloud Computing Companies" 

Read the related research paper “The Impact of Privacy Policy Changes on Venture Capital Investment in Online Advertising Companies”