Comparing Radical and Incremental Innovation in Venture Capital Syndication: Exploring the Influence of R&D Intensity and Sector-Specific Effects

Venture capital is viewed by many researchers as a tool for supporting innovation through the provision of funding for high-risk innovative projects. Furthermore, the literature suggests that syndication, wherein two or more venture capitalists (investors) collaborate to fund a project, can enhance performance through the combination of financial resources and expertise. This paper aims to investigate the influence of venture capital syndication on innovation. Specifically, it examines whether radical or incremental innovation is more effectively fostered and the impact of syndication on R&D intensity. It also explores the impact of R&D on innovation. Additionally, it examines whether the industry sector has an impact on the type of innovation developed. To gather data, a questionnaire was administered to venture capital–backed Moroccan companies. The study utilized a statistical analysis method called partial least squares structural equation modeling (PLS-SEM). The findings reveal that there is no significant link between venture capital syndication and radical innovation. However, venture capital syndication does have a positive effect on incremental innovation. Whether in service or industrial activities, incremental innovation tends to result in better outcomes compared to radical innovation. Additionally, venture capital syndication positively impacts R&D intensity, but R&D itself does not affect radical innovation. The results of this study can be instrumental in making well-informed decisions when selecting syndication partners or innovation strategies.