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The Effects of Government-Sponsored Venture Capital: International Evidence

James Brander, Qianqian Du and Thomas Hellmann ()

No 16521, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the impact of government-sponsored venture capitalists (GVCs) on the success of enterprises. Using international enterprise-level data, we identify a surprising non-monotonicity in the effect of GVC on the likelihood of exit via initial public offerings (IPOs) or third party acquisitions. Enterprises that receive funding from both private venture capitalists (PVCs) and GVCs outperform benchmark enterprises financed purely by private venture capitalists if only a moderate fraction of funding comes from GVCs. However, enterprises underperform if a large fraction of funding comes from GVCs. Instrumental variable regressions suggest that endogeneity in the form of unobservable selection effects cannot account for these effects of GVC financing. The underperformance result appears to be largely driven by investments made in times when private venture capital is abundant. The outperformance result applies only to venture capital firms that are supported but not owned outright by governments.

JEL-codes: G24 H44 H81 O38 (search for similar items in EconPapers)
Date: 2010-11
New Economics Papers: this item is included in nep-ent
Note: CF
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Published as The Effects of Government-Sponsored Venture Capital: International Evidence* James A. Brander1, Qianqian Du2 and Thomas Hellmann3 Review of Finance (2014) doi: 10.1093/rof/rfu009

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Journal Article: The Effects of Government-Sponsored Venture Capital: International Evidence (2015) Downloads
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