The Legislative Road to Silicon Valley

Oxford Economic Papers, Vol. 58, pp. 596-635, 2006

Posted: 26 Jul 2005 Last revised: 10 Sep 2008

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Douglas J. Cumming

Florida Atlantic University

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Abstract

Must policymakers seeking to replicate the success of Silicon Valley's venture capital market first copy other US institutions, such as deep and liquid stock markets? Or can legislative reforms alone make a significant difference? In this paper, we compare the economic and legal determinants of venture capital investment, fundraising and exits. We introduce a cross-sectional and time series empirical analysis across 15 countries and 14 years of data spanning an entire business cycle. We show that liberal bankruptcy laws stimulate entrepreneurial demand for venture capital; that government programmes more often hinder than help the development of private equity, and that the legal environment matters as much as the strength of stock markets. Our results imply generalizable lessons for legal reform.

Keywords: Venture capital, law and finance, bankruptcy

JEL Classification: G24, G28, G33, G38, H25

Suggested Citation

Armour, John and Cumming, Douglas J., The Legislative Road to Silicon Valley. Oxford Economic Papers, Vol. 58, pp. 596-635, 2006. Available at SSRN: https://ssrn.com/abstract=760367

John Armour (Contact Author)

University of Oxford - Faculty of Law ( email )

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HOME PAGE: http://www.law.ox.ac.uk/people/john-armour

University of Oxford - Said Business School ( email )

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Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/about-us/people/john-armour

European Corporate Governance Institute (ECGI) ( email )

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Belgium

HOME PAGE: http://www.ecgi.org

Douglas J. Cumming

Florida Atlantic University ( email )

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Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

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