Difference between revisions of "Brander Egan Hellmann (2010) - Government Sponsored versus Private Venture Capital"
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*[[Media:Brander_Egan_Hellmann_(2010)_-_Government_Sponsored_versus_Private_Venture_Capital.pdf|Download the PDF]] | *[[Media:Brander_Egan_Hellmann_(2010)_-_Government_Sponsored_versus_Private_Venture_Capital.pdf|Download the PDF]] | ||
*[[:Image:Brander_Egan_Hellmann_(2010)_-_Government_Sponsored_versus_Private_Venture_Capital.pdf|Repository record]] | *[[:Image:Brander_Egan_Hellmann_(2010)_-_Government_Sponsored_versus_Private_Venture_Capital.pdf|Repository record]] | ||
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| + | ==Status== | ||
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| + | *This paper is published in an NBER book ("International Differences In Entrepreneurship", edited by J. Lerner and A. Schoar). | ||
| + | *Google Scholar listed 22 cites as of Oct 2011. | ||
==Abstract== | ==Abstract== | ||
This paper investigates the relative performance of enterprises backed by government-sponsored venture capitalists and private venture capitalists. While previous studies focus mainly on investor returns, this paper focuses on a broader set of public policy objectives, including value-creation, innovation, and competition. A number of novel data-collection methods, including web-crawlers, are used to assemble a near-comprehensive data set of Canadian venture-capital backed enterprises. The results indicate that enterprises financed by government-sponsored venture capitalists underperform on a variety of criteria, including value-creation, as measured by the likelihood and size of IPOs and M&As, and innovation, as measured by patents. It is important to understand whether such underperformance arises from a selection effect in which private venture capitalists have a higher quality threshold for investment than subsidized venture capitalists, or whether it arises from a treatment effect in which subsidized venture capitalists crowd out private investment and, in addition, provide less effective mentoring and other value-added skills. We find suggestive evidence that crowding out and less effective treatment are problems associated with government-backed venture capital. While the data does not allow for a definitive welfare analysis, the results cast some doubt on the desirability of certain government interventions in the venture capital market. | This paper investigates the relative performance of enterprises backed by government-sponsored venture capitalists and private venture capitalists. While previous studies focus mainly on investor returns, this paper focuses on a broader set of public policy objectives, including value-creation, innovation, and competition. A number of novel data-collection methods, including web-crawlers, are used to assemble a near-comprehensive data set of Canadian venture-capital backed enterprises. The results indicate that enterprises financed by government-sponsored venture capitalists underperform on a variety of criteria, including value-creation, as measured by the likelihood and size of IPOs and M&As, and innovation, as measured by patents. It is important to understand whether such underperformance arises from a selection effect in which private venture capitalists have a higher quality threshold for investment than subsidized venture capitalists, or whether it arises from a treatment effect in which subsidized venture capitalists crowd out private investment and, in addition, provide less effective mentoring and other value-added skills. We find suggestive evidence that crowding out and less effective treatment are problems associated with government-backed venture capital. While the data does not allow for a definitive welfare analysis, the results cast some doubt on the desirability of certain government interventions in the venture capital market. | ||
Revision as of 12:53, 17 October 2011
Contents
Reference
Brander, James A., Edward J. Egan, and Thomas F. Hellmann (2010), "Government Sponsored versus Private Venture Capital: Canadian Evidence", in "International Differences In Entrepreneurship", J. Lerner and A. Schoar, National Bureau of Economic Research, Cambridge, MA.
File(s)
Status
- This paper is published in an NBER book ("International Differences In Entrepreneurship", edited by J. Lerner and A. Schoar).
- Google Scholar listed 22 cites as of Oct 2011.
Abstract
This paper investigates the relative performance of enterprises backed by government-sponsored venture capitalists and private venture capitalists. While previous studies focus mainly on investor returns, this paper focuses on a broader set of public policy objectives, including value-creation, innovation, and competition. A number of novel data-collection methods, including web-crawlers, are used to assemble a near-comprehensive data set of Canadian venture-capital backed enterprises. The results indicate that enterprises financed by government-sponsored venture capitalists underperform on a variety of criteria, including value-creation, as measured by the likelihood and size of IPOs and M&As, and innovation, as measured by patents. It is important to understand whether such underperformance arises from a selection effect in which private venture capitalists have a higher quality threshold for investment than subsidized venture capitalists, or whether it arises from a treatment effect in which subsidized venture capitalists crowd out private investment and, in addition, provide less effective mentoring and other value-added skills. We find suggestive evidence that crowding out and less effective treatment are problems associated with government-backed venture capital. While the data does not allow for a definitive welfare analysis, the results cast some doubt on the desirability of certain government interventions in the venture capital market.
