The Legal Road To Replicating Silicon Valley

John Armour and Douglas Cumming

Working Papers from Centre for Business Research, University of Cambridge

Abstract: Must policymakers seeking to replicate the success of Silicon Valley’s venture capital market first replicate other US institutions, such as deep and liquid stock markets? Or can legal 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 13 years of data spanning an entire business cycle. We show that the legal environment matters as much as the strength of stock markets; that government programmes more often hinder than help the development of private equity, and that temperate bankruptcy laws stimulate entrepreneurial demand for venture capital. Our results provide generalizable lessons for legal reform.

Keywords: venture capital; law and finance; bankruptcy (search for similar items in EconPapers)
JEL-codes: G24 G28 G33 G38 H25 (search for similar items in EconPapers)
Date: 2004-04
New Economics Papers: this item is included in nep-ent, nep-his and nep-pbe
Note: PRO-2
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:cbr:cbrwps:wp281

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