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A Policy Response to Regional Disparities in the Supply of Risk Capital to New Technology-based Firms in the European Union: The European Seed Capital Fund Scheme


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  • Gordon Murray
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    MURRAY G. C. (1998) A policy response to regional disparities in the supply of risk capital to new technology-based firms in the European Union: the European Seed Capital Fund Scheme, Reg. Studies 32 , 405-419. The European Seed Capital Fund Pilot Scheme (1988-95) was a European Commission response to two primary concerns that: (1) private venture capital firms in Europe were increasingly retreating from the financing and support of start-up, early-stage and, particularly, technologybased enterprises; and (2) existing spatial concentrations in the supply of venture capital prejudiced the formation of new, innovative businesses in less economically developed regions of the Union. This paper presents the updated results of a study of this Scheme in 1992. The comparative internal dynamics of the Seed Funds are explored. The Scheme realized its goal of encouraging private investment into innovative, technology-based young firms. However, the continued ability of the funds to meet longer-term commercial and/or regional developmental objectives is questioned given scale-related problems of economic viability. MURRAY G. C. (1998) La reponse politique aux ecarts regionaux de l'offre de capital-risque aux entreprises basees sur les nouvelles technologies et situees au sein de l'Union europeenne: le programme en faveur d'un fonds europeen de capitaux de lancement, Reg. Studies 32 , 405-419. Le programme en faveur d'un fonds europeen de capitaux de lancement (European Seed Capital Fund Pilot Scheme 1988-95), a ete une reponse de la part de la Commission europeenne a deux soucis primordiaux. Primo, en Europe les entreprises de capital-risque privees se retiraient de plus en plus du financement et du soutien des pepinieres d'entreprises, des entreprises dans les phases initiales de developpement et des entreprises basees sur les nouvelles technologies. Secundo, Les concentrations geographiques existantes de l'offre de capital-risque entravaient la creation de nouvelles entreprises innovatrices dans les zones defavorisees de l'Union. Cet article cherche a presenter les resultats mis a jour d'une etude de ce programme faite en 1992. On examine la dynamique interne comparative du fonds. Le programme a reussi a encourager l'investissement prive dans de nouvelles entreprises innovatrices, basees sur les nouvelles technologies. Cependant, on remet en question la capacite des fonds a repondre aux objectifs commerciaux et/ou regionaux a plus long terme etant donne le probleme de leur viabilite economique lie a la notion d'echelle. MURRAY G. C. (1998) Eine grundsatzliche Antwort auf regionale Ungleichheiten im Angebot von Risikokapital fur auf neuer Technologie aufgebaute Firmen in der Europaischen Union: das europaische Saatkornkapitalfond Project, Reg. Studies 32 , 405-419. Das europaische Saatkornkapitalfond Versuchsprojekt (1988-1995)stellte eine Antwort der europaischen Kommission auaf zwei grundlegende Anliegen dar: (1) private Risikokapitalfirmen in Europa zogen sich zunehmend von der Finanzierung und Unterstutzung neu gegrundeter, in Anfangen begriffener und vorallem von auf Technologie aufgebauten Unternehmen zuruck, und (2) bestehende raumliche Konzentrationen beim Aufbringen von Risikokapital beeintrachtigten die Bildung neuer, innovativer Geschaftsunternehmungen in weniger entwikkelten Gebieten der Union. Dieser Aufsatz stellt die auf den neuesten Stand gebrachten Ergebnisse einer Studie dieses Projektes vom Jahre 1992 vor. Die vergleichsweise interne Dynamik der Saatkornfonds wird untersucht. Das Projekt verwirklichte das ihm gesteckte Ziel, private Investierungen in innovativen, auf Technologie aufgebauten jungen Firmen zu ermutigen. Die anhaltende Fahigkeit des Fonds, das Kapital fur langerfristige kommerzielle und/oder regionale Entwicklungsobjekte aufzubringen, wird jedoch angesichts der Grossenordnung bezogenen Probleme wirtschaftlicher Realisierbarkeit wegen in Frage gestellt.

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    Article provided by Taylor & Francis Journals in its journal Regional Studies.

    Volume (Year): 32 (1998)
    Issue (Month): 5 ()
    Pages: 405-419

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    Handle: RePEc:taf:regstd:v:32:y:1998:i:5:p:405-419

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    Keywords: Venture Capital; High Technology; Regional Development; Small Firms;


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    1. Gorman, Michael & Sahlman, William A., 1989. "What do venture capitalists do?," Journal of Business Venturing, Elsevier, vol. 4(4), pages 231-248, July.
    2. Sapienza, Harry J., 1992. "When do venture capitalists add value?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 9-27, January.
    3. Macmillan, Ian C. & Siegel, Robin & Narasimha, P. N. Subba, 1985. "Criteria used by venture capitalists to evaluate new venture proposals," Journal of Business Venturing, Elsevier, vol. 1(1), pages 119-128.
    4. Hustedde, Ronald J. & Pulver, Glen C., 1992. "Factors affecting equity capital acquisition: The demand side," Journal of Business Venturing, Elsevier, vol. 7(5), pages 363-374, September.
    5. Hall, John & Hofer, Charles W., 1993. "Venture capitalists' decision criteria in new venture evaluation," Journal of Business Venturing, Elsevier, vol. 8(1), pages 25-42, January.
    6. D E Keeble, 1989. "High-technology industry and regional development in Britain: the case of the Cambridge phenomenon," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 7(2), pages 153-172, April.
    7. Macmillan, Ian C. & Zemann, Lauriann & Subbanarasimha, P. N., 1987. "Criteria distinguishing successful from unsuccessful ventures in the venture screening process," Journal of Business Venturing, Elsevier, vol. 2(2), pages 123-137.
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    Cited by:
    1. Valérie Revest & Alessandro Sapio, 2012. "Financing technology-based small firms in Europe: what do we know?," Small Business Economics, Springer, vol. 39(1), pages 179-205, July.
    2. Makra, Zsolt, 2009. "A technológiai vállalkozások létrejötte, növekedése és gazdasági szerepe a szakirodalom tükrében
      [The establishment, growth and economic role of technology firms in the light of the spec
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 176-186.
    3. Jaaskelainen, Mikko & Maula, Markku & Murray, Gordon, 2007. "Profit distribution and compensation structures in publicly and privately funded hybrid venture capital funds," Research Policy, Elsevier, vol. 36(7), pages 913-929, September.
    4. Julia Hirsch & Uwe Walz, 2013. "Why do contracts differ between venture capital types?," Small Business Economics, Springer, vol. 40(3), pages 511-525, April.
    5. Judit Karsai, 2004. "Can the state replace private capital investors? Public financing of venture capital in Hungary," IEHAS Discussion Papers 0409, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    6. Dafna Schwartz & Raphael Bar-El, 2006. "Venture Investments in Israel - A Regional Perspective Dafna Schwartz and Raphael Bar-El Ben-Gurion University, School of Management, Israel," ERSA conference papers ersa06p868, European Regional Science Association.
    7. Achleitner, Ann-Kristin & Braun, Reiner & Bender, Marko & Geidner, Annabell, 2008. "Community development venture capital: concept and status quo in Germany," CEFS Working Paper Series 2008-03, Center for Entrepreneurial and Financial Studies (CEFS), Technische Universität München.
    8. Murray, Gordon C. & Marriott, Richard, 1998. "Why has the investment performance of technology-specialist, European venture capital funds been so poor?," Research Policy, Elsevier, vol. 27(9), pages 947-976, December.
    9. Backman, Mikaela, 2013. "Banks and New Firm Formation," Working Paper Series in Economics and Institutions of Innovation 301, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    10. Veroniek Collewaert & Sophie Manigart & Rudy Aernoudt, 2010. "Assessment of Government Funding of Business Angel Networks in Flanders," Regional Studies, Taylor & Francis Journals, vol. 44(1), pages 119-130.
    11. Colin Mason & Richard Harrison, 2003. "Closing the Regional Equity Gap? A Critique of the Department of Trade and Industry's Regional Venture Capital Funds Initiative," Regional Studies, Taylor & Francis Journals, vol. 37(8), pages 855-868.


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