We analyze the venture capital strategies for optimizing the financing of SME’s, considering that this aspect might contribute to the innovation process. We analyze the special role of VC finance in influencing innovation strategies. VC can push towards building absorptive capacity and towards more permanent inhouse R&D efforts. Public funding relaxes financial constraints, but does not lead to a build-up of absorptive capacity. Our focus is on the special role of VCF’s venture capital in shaping companies' innovation strategies and the company’s ability to attract VC investors. There is also a strong contribution on the role of VC in the commercialization stage of innovations.

venture capital (VC), VC funds (VCF), innovative SME, foreign direct investment (FDI)