Government as Fund-of-Fund and VC Fund Sponsors: Effect on Employment in Portfolio Companies

Small Business Economics, DOI: 10.1007/s11187-016-9831-9, Forthcoming

Posted: 18 Sep 2017

See all articles by Thomas Standaert

Thomas Standaert

Ghent University - Univ Lille 2

Sophie Manigart

Vlerick Business School; Ghent University

Date Written: September 14, 2017

Abstract

Governments around the world have set up fund-of-fund programs to increase the supply of venture capital financing to young growth-oriented firms. In these programs, a government fund-of-fund acts as limited partner in a venture capital fund. The venture capital investment process is hereby delegated to external investors, which were selected by the government fund-of-fund. We investigate employment growth in 108 portfolio companies that benefited from the ARKimedes fund-of-fund in Flanders. Accounting for the heterogeneity in the types of venture capital investors managing hybrid funds, and the associated goal diversity and resource endowments, we find that portfolio companies backed by hybrid independent venture capital funds show greater employment growth than those backed by hybrid captive or hybrid government venture capital funds. This finding is relevant because it indicates that the financial objectives of hybrid independent venture capital funds are highly compatible with the government’s objective of employment growth, as providing companies with superior monitoring and value adding services with the objective of realizing a successful exit creates employment in the process.

Keywords: Venture capital, Public policy, Government venture capital, Employment growth

JEL Classification: G24, G28, J23

Suggested Citation

Standaert, Thomas and Manigart, Sophie, Government as Fund-of-Fund and VC Fund Sponsors: Effect on Employment in Portfolio Companies (September 14, 2017). Small Business Economics, DOI: 10.1007/s11187-016-9831-9, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3036861

Thomas Standaert

Ghent University - Univ Lille 2 ( email )

Sint-Pietersplein 7
Ghent, 9000
Belgium

Sophie Manigart (Contact Author)

Vlerick Business School ( email )

Reep 1
Ghent, BE-9000
Belgium

Ghent University ( email )

Sint-Pietersplein 7
Gent, 9000
Belgium

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