The Dance Between Government and Private Investors: Public Entrepreneurial Finance around the Globe

82 Pages Posted: 26 Apr 2021 Last revised: 15 Mar 2022

See all articles by Jessica Bai

Jessica Bai

Harvard University, Department of Economics

Shai Bernstein

Harvard Business School

Abhishek Dev

Yale School of Management

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 9, 2022

Abstract

This paper examines the interaction between governments and private capital investors when financing early-stage ventures. We first provide a simple conceptual framework to explore when collaboration between governments and private investors is likely to emerge. Using hand-collected data on 755 programs worldwide, we find that government programs frequently involve private capital investors. Collaboration is greater when governments are more effective, when programs target earlier-stage companies, and when the local private venture market is more developed. Such collaborations mostly occur through joint equity investments and matching-funds requirements. These findings underscore the importance of government synergies with local private capital markets.

Keywords: Venture capital, subsidy, industrial policy

JEL Classification: G24, H25, H81

Suggested Citation

Bai, Jessica and Bernstein, Shai and Dev, Abhishek and Lerner, Josh, The Dance Between Government and Private Investors: Public Entrepreneurial Finance around the Globe (January 9, 2022). Available at SSRN: https://ssrn.com/abstract=3834040 or http://dx.doi.org/10.2139/ssrn.3834040

Jessica Bai

Harvard University, Department of Economics ( email )

Cambridge, MA 02138

Shai Bernstein

Harvard Business School ( email )

Boston, MA 02163
United States

Abhishek Dev

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

Josh Lerner (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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