The Effects of Government‐Sponsored Venture Capital: International Evidence

Globalization of Alternative Investments Working Papers, Vol. 3: The Global Economic Impact of Private Equity Report 2010, World Economic Forum

36 Pages Posted: 29 Mar 2010

See all articles by James A. Brander

James A. Brander

University of British Columbia (UBC) - Sauder School of Business

Qianqian Du

Hong Kong Polytechnic University

Thomas F. Hellmann

University of Oxford - Said Business School; University of Oxford - Said Business School

Date Written: March 16, 2010

Abstract

This paper examines the impact of government‐sponsored venture capitalists (GVCs) on the success of client enterprises. Using international company‐level data, we identify a surprising non‐monotonicity in the effect of GVC on the likelihood of exit via initial public offerings (IPOs) or third party acquisitions. Companies that receive funding from both private venture capitalists (PVCs) and GVCs outperform a benchmark companies financed purely by private venture capitalists if only a moderate fraction of funding comes from GVCs, but significantly underperform if a large fraction of funding comes from GVCs. Using an instrumental variable approach, it appears that endogeneity due to unobservable selection effects may be present, but they cannot fully account for the main effects of GVC financing. Our results therefore suggest that GVC funding does influence enterprise performance. The analysis shows that companies funded by GVCs create more patents.

Keywords: Venture Capital, Government, International

JEL Classification: G24, G28

Suggested Citation

Brander, James A. and Du, Qianqian and Hellmann, Thomas F., The Effects of Government‐Sponsored Venture Capital: International Evidence (March 16, 2010). Globalization of Alternative Investments Working Papers, Vol. 3: The Global Economic Impact of Private Equity Report 2010, World Economic Forum. Available at SSRN: https://ssrn.com/abstract=1573257 or http://dx.doi.org/10.2139/ssrn.1573257

James A. Brander

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8483 (Phone)
604-822-8477 (Fax)

Qianqian Du (Contact Author)

Hong Kong Polytechnic University ( email )

9/F, Li Ka Shing Tower
The Hong Kong Polytechnic University
Hong Kong, Hung Hom, Kowloon M923
China

Thomas F. Hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0)1865 288937 (Phone)

HOME PAGE: http://www.sbs.ox.ac.uk/community/people/thomas-hellmann

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