Industrial Policy Reshapes Venture Capital Allocation and Growth Trajectories in Climate Technologies
WORKING PAPER
With Yikai Cao, Rishee Jain, and Dinesh Moorjani. Targeting PNAS. Using firm-level data on 7,271 climate technology companies and 132,826 firm-quarter observations, we examine how the Inflation Reduction Act reshaped private capital allocation. We find the IRA selectively channeled venture capital toward policy-aligned technologies and longer-horizon investors, expanded pure-VC and non-dilutive ecosystem capital while contracting VC-debt structures, and identify policy credibility — measured via a novel index of statutory specificity, durability, and enforceability — as a critical channel. A natural stress test using 2025 legislative threats to IRA provisions confirms that policy durability itself shapes investment behavior.