Public Policy and the Creation of Active Venture Capital Markets

By M. Rin, Giovanna Nicodano, A. Sembenelli. Social Science Research Network, 2006

277 citations recorded by the source corpus.

We study how public policy can contribute to increase the share of early stage and high-tech venture capital investments, thus helping the development of active venture capital markets. A simple extension of the seminal model by Holmstrom and Tirole (1997) provides a theoretical base for our analysis. We then explore a unique panel of data for 14 European countries between 1988 and 2001. We have several novel findings. First, the opening of stock markets targeted at entrepreneurial companies positively affects the shares of early stage and high-tech venture capital investments; reductions in capital gains tax rates have a similar, albeit weaker, effect. Second, a reduction in labor regulation creases the share of high-tech investments. Finally, we find no evidence of a shortage of supply of venture capital funds, and no evidence of an effect of increased public R&D spending on the share of high-tech or early stage venture capital investments. JEL Classification: G10, G24, H20, O30

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/423b7245bc482fc8003526939b1366688b241efd

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Citations in the corpus

Varieties of entrepreneurship: exploring the institutional foundations of different entrepreneurship types through ‘Varieties-of-Capitalism’ arguments (2018, background): “Consequently, the availability of venture capital funds is systematicallymore limited in CMEs than in the LMEs (Bottazzi and Da Rin 2002; Da Rin et al. 2006).”
Financing Constraints and Entrepreneurship (2009, background): “Studies of entrepreneurial finance, however, show that stricter regulations reduce VC investment and high-growth entrepreneurship (Jeng and Wells 2000, Da Rin et al. 2006, Bozkaya and Kerr 2007).”
Entrepreneurship and public policy (2009, unknown): “, Bottazzi and Da Rin (2002) and Da Rin et al. (2006), 82 OECD (1998). 83 Scarpetta et al.”
Formal institutions, culture, and venture capital activity: A cross-country analysis (2012, unknown): “…(Gompers et al., 1998; Jeng and Wells, 2000), quality of specific regulatory policies such as labor market regulations (Jeng andWells, 2000), tax policies (Da Rin et al., 2006), governmentsponsored funds and programs (Armour and Cumming, 2006), and bankruptcy laws (Armour and Cumming, 2006).”
Environmental policies and risk finance in the green sector: Cross-country evidence (2015, background): “There is an important but not extensive strand of literature on the determinants of venture capital investment (see for example Gompers and Lerner, 2001; Jeng and Wells, 2000; Schertler, 2003 and Romain and Van Pottelsberghe de la Potterie, 2004; da Rin et al., 2006).”
Presidential Address: Does Finance Benefit Society? (2015, unknown): “Da Rin, Nicodano, and Sembenelli (2006) find that in Europe the opening of a “New Market” for smaller companies had a positive and significant effect on the proportion of private equity funds invested in early stage ventures and high-tech industries.”