The sovereign debt crisis is hitting the European economy hard. Policymakers are desperate for solutions. But it would be much more difficult to resolve the crisis if economies continue to stagnate or contract. The main driver of modern economic growth is entrepreneurial innovation (Schumpeter, 1911, 1934; Romer, 1990; Grossman and Helpman, 2002; and Aghion and Howitt, 1992, 1998). Innovation requires constant investment in entrepreneurial businesses. Corporate financing, however, is too risky and expensive for traditional conservative investors. Financial problems are particularly acute in high-growth entrepreneurial firms due to their inherent uncertainty (Hall, 2002). The Community Innovation Survey (2002) indicates that the lack of appropriate sources of finance and the high costs of innovation are the most cited hindering factors in European businesses. Financial constraints force almost one in three innovative or potentially innovative Dutch companies to abandon or slow down their innovative projects (Mohnen, Palm, van Der Loeff and Tiwart, 2008). Savignac (2006) also notes that 17.25% of innovative companies are financially constrained in France. The venture capital (VC) market provides the unique link between financial surplus and innovation, and alleviates the problem of underinvestment in the innovative activities of small and new companies. companies (Hall, 2002). The structure of venture capital firms appears to be designed specifically to light fires in scrappy, ambitious startups, to materialize new business ideas, and to maximize returns on investment in genuine innovation projects (Stuck and Weingarten, 2005 ). There is both ad hoc and academic evidence. suggesting that venture capital drives US innovation, e.g. NVCA (2010), Hellmann and Puri (2000), Kortum and Lerner (2001), and Ueda and Hirukawa (2003). However, the empirical results in Europe are not unanimous. On the one hand, Tykvova (2000) finds that venture capital investments have a very significant positive effect on patent activity in Germany. Engel and Keilbach (2002) reveal that the average number of patents in the German venture capital-funded group is slightly higher than in the control group. Bertoni et al. (2009) indicate that venture capital investments favor the patenting activity of Italian companies. And Colombo et al. (2009a) find that venture capital investments have a positive impact on the productivity of 222 Italian firms operating in the high-tech manufacturing and services sector. On the other hand, Peneder (2010) finds that Austrian venture capital firms have a positive impact on business growth, but not on innovation production. Pinch and Sunley (2009) find that there is little evidence that UK venture capital firms promote the innovation performance of their investee entities..