Public Policy for Venture Capital
Journal
International Tax and Public Finance
ISSN
0927-5940
ISSN-Digital
1573-6970
Type
journal article
Date Issued
2001-08-01
Author(s)
Abstract
This paper proposes a simple partial equilibrium model to investigate the effects of government policy on venture capital backed investments. Giving up an alternative career, entrepreneurs focus their effort on a single, high risk venture each. Venture capitalists acquire an equity stake and offer a base salary as well. In addition to providing incentive compatible equity finance, they support the venture with managerial advice to raise survival chances. We analyze several policy measures addressed at venture capital activity: government spending on entrepreneurial training, subsidies to equipment investment, and output subsidies at the production stage. While these measures stimulate entrepreneurship, only cost-effective government services can improve welfare.
Language
English
Keywords
Studies
venture capital
public policy
economic theory
moral hazard.
HSG Classification
not classified
Refereed
No
Publisher
Springer
Publisher place
New York
Volume
8
Number
4
Start page
557
End page
572
Pages
16
Subject(s)
Eprints ID
21894