The Effects of Incentive Structures on the Performance of Publicly Funded Venture Capital Funds

13 Pages Posted: 28 Feb 2011

See all articles by Mikko Jaaskelainen

Mikko Jaaskelainen

Aalto University - Industrial Engineering and Management

Markku V. J. Maula

Aalto University, Department of Industrial Engineering and Management

Gordon C. Murray

University of Exeter Business School

Date Written: 2006

Abstract

A majority of developed countries have realized the importance of functioning venture capital markets for job creation, innovation, and economic growth. Accordingly, governments have taken measures to support the development and efficient functioning of national venture capital markets. As a policy response, particularly in the more problematic early-stage investment area, many countries have set up government financed support programs to channel risk capital to new ventures through private VC funds. The choice of the incentive structure for a publicly co-financed and privately managed venture capital fund is crucial for the success of a program. However, there is very little robust research determining the actual effects of different structures on fund performance. A comparison of government VC structures has been hindered by both the variety of utilized structures and the plurality of domestic environments. In this study, we examine the effects of different incentive structures on the performance of publicly co-financed venture capital programs under changing market conditions by comparing these structures in a simulation model.

Keywords: Entrepreneurship

JEL Classification: M13

Suggested Citation

Jaaskelainen, Mikko and Maula, Markku V. J. and Murray, Gordon C., The Effects of Incentive Structures on the Performance of Publicly Funded Venture Capital Funds (2006). Babson College, Babson Kauffman Entrepreneurship Research Conference (BKERC), 2002-2006, Available at SSRN: https://ssrn.com/abstract=1768139

Mikko Jaaskelainen (Contact Author)

Aalto University - Industrial Engineering and Management

POB 9500
02015, Aalto 00076
Finland

Markku V. J. Maula

Aalto University, Department of Industrial Engineering and Management ( email )

PO Box 15500
FI-00076 AALTO
Espoo
Finland

HOME PAGE: http://users.aalto.fi/mmaula/

Gordon C. Murray

University of Exeter Business School ( email )

Streatham Court
Rennes Drive
Exeter EX4 4PU
United Kingdom
+44 777 522 0857 (Phone)

HOME PAGE: http://business-school.exeter.ac.uk/staff/profile.php?id=34

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