IDEAS home Printed from
   My bibliography  Save this article

Credit and Private Equity Financing in Young Innovative Small and Medium-sized Companies in Germany


  • Dorothea Schäfer
  • Axel Werwatz
  • Volker Zimmermann


Successful newly established companies are a significant factor for the prosperous development of a national economy. Young innovative companies play a key role in the quick market launch and distribution of new technologies and products. As founders only rarely have sufficient own funds, financing has a considerable influence on the success of a newly established company. In the course of the investment boom in the USA and the breathtaking speed at which American Venture Capital (VC) companies listed their newly established portfolio companies in the stock market, the general attitude seems to be that a strong VC sector makes a significant contribution to the establishment of new companies and to innovation. However, it remains to be seen what role banks play in financing young technology companies. The analysis conducted by DIW together with the KfW bank group concerning the financing pattern of credit institutions and private equity companies in the sector of young technology companies is an initial contribution towards closing the gap in regard to the German market.1 The result of the analysis2 is that private equity is very likely to flow into investments bearing a higher financial risk. However, such clear statements cannot be made in connection with the economic performance risk _ possibly expressed in terms of innovation contents and objectives of the project. Many indicators for the economic performance risk _ this includes the company's R&D-orientation as well as various characteristics of the executed innovation projects _ proved to be insignificant or do not show the expected trend. Only the variable 'regular research and development' increases the likelihood of receiving private equity financing. The next step in the course of the research cooperation between DIW Berlin and the KfW bank group will be the quest for the causes of these unexpected findings.

Suggested Citation

  • Dorothea Schäfer & Axel Werwatz & Volker Zimmermann, 2005. "Credit and Private Equity Financing in Young Innovative Small and Medium-sized Companies in Germany," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 1(36), pages 431-435.
  • Handle: RePEc:diw:diwwrp:wr1-36

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:diw:diwwrp:wr1-36. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.