The Dance Between Government and Private Investors: Public Entrepreneurial Finance around the Globe
82 Pages Posted: 26 Apr 2021 Last revised: 15 Mar 2022
Date Written: January 9, 2022
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: Suggested Citation