Under What Conditions Do Venture Capital Markets Emerge?
AbstractVenture capital activity differs considerably across countries. Venture capital markets are highly developed in few countries, while these markets are almost nonexistent in many other countries. This paper examines the conditions that have to be fulfilled for liquid venture capital markets to emerge. Using a general equilibrium model, two necessary conditions are identified. First, value added by venture capitalistsÂ’ active involvement must be high compared to the costs of management support. Second, the number of high-technology enterprises demanding venture capital must exceed a critical level. The paper discusses how differences in financial and innovation systems affect these two conditions.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1119.
Length: 22 pages
Date of creation: Jul 2002
Date of revision:
Management support; high-technology enterprises; venture capital finance;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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