The Effects of Government-Sponsored Venture Capital: International Evidence

32 Pages Posted: 14 Nov 2010 Last revised: 29 Oct 2014

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: November 2010

Abstract

This paper examines the impact of government-sponsored venture capitalists (GVCs) on the success of enterprises. Using international enterprise-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. Enterprises that receive funding from both private venture capitalists (PVCs) and GVCs outperform benchmark enterprises financed purely by private venture capitalists if only a moderate fraction of funding comes from GVCs. However, enterprises underperform if a large fraction of funding comes from GVCs. Instrumental variable regressions suggest that endogeneity in the form of unobservable selection effects cannot account for these effects of GVC financing. The underperformance result appears to be largely driven by investments made in times when private venture capital is abundant. The outperformance result applies only to venture capital firms that are supported but not owned outright by governments.

Suggested Citation

Brander, James A. and Du, Qianqian and Hellmann, Thomas F., The Effects of Government-Sponsored Venture Capital: International Evidence (November 2010). NBER Working Paper No. w16521. Available at SSRN: https://ssrn.com/abstract=1708763

James A. Brander (Contact Author)

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

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

Qianqian Du

Hong Kong Polytechnic University ( email )

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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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