Optimal Public Policy For Venture Capital Backed Innovation

Christian Keuschnigg

University of St. Gallen Department of Economics working paper series 2003 from Department of Economics, University of St. Gallen

Abstract: This paper discusses the role of public policy towards the venture capital industry. The model emphasizes four margins: supply of entrepreneurs due to career choice, entry of venture capital funds and search for investment opportunities, simultaneous entrepre-neurial effort and managerial advice subject to double moral hazard, and mark-up pricing when the successful firm introduces a new good. The paper derives an optimal policy that succeeds to implement a first best allocation in decentralized equilibrium. It also considers short- and long-run comparative static and welfare effects of piecemeal reform with regard to the capital gains tax, innovation subsidy, public R\&D spending and other policy initiatives.

Keywords: Innovation; venture capital; double moral hazard; public policy (search for similar items in EconPapers)
JEL-codes: D82 G24 H21 H25 H32 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2003-04
New Economics Papers: this item is included in nep-cfn and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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http://ux-tauri.unisg.ch/RePEc/usg/dp2003/dp0309keuschnigg_ganz.pdf (application/pdf)

Related works:
Working Paper: Optimal Public Policy for Venture Capital Backed Innovation (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2003:2003-09

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