Venture Capital: A Case for Investment Promotion

CEPR Discussion Paper Series No. 1887

Posted: 16 Sep 1998

See all articles by Christian Keuschnigg

Christian Keuschnigg

University of St. Gallen – Department of Economics (FGN-HSG); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Date Written: July 1998

Abstract

Venture capitalists provide risk capital and valuable monitoring services that are essential for the success of upstart companies. The financial sectoris expertise in monitoring investment proposals may increase with the accumulated experience in funding such projects. In the other direction, the productivity gains from learning lower the cost of venture capital finance and reinforce start-up investment. Since learning depends on aggregate investment, the effect is external to individual agents. The paper demonstrates how the nature of the externality depends on the state of financial sector development, and how the appropriate tax/subsidy policy should be tailored to it.

JEL Classification: G20. G24. H23. H25. O16

Suggested Citation

Keuschnigg, Christian, Venture Capital: A Case for Investment Promotion (July 1998). CEPR Discussion Paper Series No. 1887, Available at SSRN: https://ssrn.com/abstract=125448

Christian Keuschnigg (Contact Author)

University of St. Gallen – Department of Economics (FGN-HSG) ( email )

Varnbuelstrasse 19
St. Gallen, 9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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