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Venture mania in Europe: Its causes and consequences

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  • Schertler, Andrea
  • Stolpe, Michael

Abstract

Over the course of the past twenty years, venture capital has fuelled an entrepreneurial revolution - first in the United States and now in Europe's common market -, which has opened new opportunities for technological innovation, capital investment and employment growth. Some of the most promising opportunities are in science-based industries, like software and biotechnology, which are often seen as driving the transformation to an increasingly knowledge- based economy. Indeed, this transformation would hardly be conceivable without the innovative contributions of business start-ups that rely on venture capital to finance their early stages of growth. So what, if anything, should governments do to support venture capital and help this transformation along? This paper will argue that governments must understand that venture capital is necessarily linked to specialization and therefore cannot be expected to play the same role in any two economies whose place, and contribution, within the international division of labour differ. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Discussion Papers with number 358.

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Date of creation: 2000
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Handle: RePEc:zbw:ifwkdp:358

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  1. Brouwer, Maria & Hendrix, Bart, 1998. " Two Worlds of Venture Capital: What Happened to U.S. and Dutch Early Stage Investment?," Small Business Economics, Springer, vol. 10(4), pages 333-48, June.
  2. Richard Nelson, 1995. "Co-evolution of Industry Structure, Technology and Supporting Institutions, and the Making of Comparative Advantage," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(2), pages 171-184.
  3. Bygrave, William D., 1987. "Syndicated investments by venture capital firms: A networking perspective," Journal of Business Venturing, Elsevier, vol. 2(2), pages 139-154.
  4. Chan, Yuk-Shee, 1983. " On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information," Journal of Finance, American Finance Association, vol. 38(5), pages 1543-68, December.
  5. Gorman, Michael & Sahlman, William A., 1989. "What do venture capitalists do?," Journal of Business Venturing, Elsevier, vol. 4(4), pages 231-248, July.
  6. Josh Lerner, 1996. "The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program," NBER Working Papers 5753, National Bureau of Economic Research, Inc.
  7. Paul Westhead & David Storey, 1997. "Financial constraints on the growth of high technology small firms in the United Kingdom," Applied Financial Economics, Taylor & Francis Journals, vol. 7(2), pages 197-201.
  8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  9. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
  10. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
  11. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
  12. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
  13. Stephen Bond & Dietmar Harhoff & John Van Reenen, 2010. "Investment, R&D and Financial Constraints in Britain and Germany," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 433-460 National Bureau of Economic Research, Inc.
  14. Andrea Schertler, 1999. "Venture Capital and Asymmetric Information in an Evolutionary Framework," Kiel Working Papers 939, Kiel Institute for the World Economy.
  15. Amit, Raphael & Brander, James & Zott, Christoph, 1998. "Why do venture capital firms exist? theory and canadian evidence," Journal of Business Venturing, Elsevier, vol. 13(6), pages 441-466, November.
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Citations

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Cited by:
  1. Rainer Fehn & Carsten-Patrick Meier, 2000. "The Positive Economics of Corporatism and Corporate Governance," Kiel Working Papers 982, Kiel Institute for the World Economy.
  2. Rainer Fehn & Carsten-Patrick Meier, 2001. "The Positive Economics of Labor Market Rigidities and Investor Protection," CESifo Working Paper Series 456, CESifo Group Munich.
  3. Michael Stolpe, 2004. "Europe's Entry into the Venture Capital Business: Efficiency and Policy," Kiel Working Papers 1223, Kiel Institute for the World Economy.
  4. Engelhardt, Lutz, 2004. "Entrepreneurial business models in the German software industry: Companies, venture capital, and stock market based growth strategies on the Neuer Markt," Discussion Papers, Research Unit: Institutions, States, Markets SP II 2004-04, Social Science Research Center Berlin (WZB).
  5. Michael Stolpe, 2003. "Learning and Signalling in the French and German Venture Capital Industries," Kiel Working Papers 1156, Kiel Institute for the World Economy.
  6. Engelhardt, Lutz, 2005. "Geschäftsmodelle und nationale Institutionen: Ein Vergleich britischer und deutscher Neuemissionen aus der IT-Service- und Softwareindustrie 1996-2002," Discussion Papers, Research Unit: Institutions, States, Markets SP II 2005-01, Social Science Research Center Berlin (WZB).
  7. Andrea Schertler, 2000. "The Impact of Public Subsidies on Venture Capital Investments in Start-Up Enterprises," Kiel Working Papers 1018, Kiel Institute for the World Economy.
  8. Michael Stolpe, 2004. "Non-Market Interaction in Primary Equity Markets: Evidence from France and Germany," Kiel Working Papers 1211, Kiel Institute for the World Economy.
  9. Andrea Schertler, 2002. "Under What Conditions Do Venture Capital Markets Emerge?," Kiel Working Papers 1119, Kiel Institute for the World Economy.
  10. Michael Stolpe, 2003. "Distribution Dynamics in European Venture Capital," Kiel Working Papers 1191, Kiel Institute for the World Economy.

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