Chapter

Government Sponsored versus Private Venture Capital

Edited by James A. Brander, Edward J. Egan and Thomas F. Hellmann

in International Differences in Entrepreneurship

Published by University of Chicago Press

Published in print June 2010 | ISBN: 9780226473093
Published online February 2013 | e-ISBN: 9780226473109 | DOI: http://dx.doi.org/10.7208/chicago/9780226473109.003.0010
Government Sponsored versus Private Venture Capital

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This chapter discusses a government program that aims to provide access to finance for start-up firms, providing in-depth forensic analysis of government-sponsored public venture capital programs in Canada. It provides information on the different government programs to support venture capital and their outcomes, and compares them to private venture funds. The chapter identifies an interesting instrument that uses the exogenous variation in the political leadership of provincial governments. Funding by government-sponsored venture capitalists is related to having left-leaning provincial governments. The negative effect of government funding on various outcome measures becomes even stronger in the instrumental variable specifications. The data do not allow for a definitive welfare analysis; the effectiveness of these direct government interventions in the venture capital market is questionable.

Keywords: government program; finance; start-up firms; venture capital; interventions

Chapter.  18889 words.  Illustrated.

Subjects: International Economics

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