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When Bureaucrats Meet Entrepreneurs: The Design of Effective "Public Venture Capital" Programmes

  • Josh Lerner

    (Harvard University and National Bureau of Economic Research, USA)

Recently public efforts to finance small high-technology firms have proliferated. We review the motivations for these efforts and make some preliminary observations about their design. We explore the underlying challenges that the financing of young growth firms poses, the ways that specialised financial intermediaries address them, and the rationales for public efforts to finance these companies. The final section makes a set of observations about the ways in which the structure of these efforts can most effectively complement private sector activity. A frequent fault in programme design is the presumption that technological criteria can be divorced from business considerations when evaluating firms. Copyright Royal Economic Society 2002

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 112 (2002)
Issue (Month): 477 (February)
Pages: F73-F84

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Handle: RePEc:ecj:econjl:v:112:y:2002:i:477:p:f73-f84
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  1. Charles P. Himmelberg & Bruce C. Petersen, 1991. "R&D and internal finance: a panel study of small firms in high-tech industries," Working Paper Series, Macroeconomic Issues 91-25, Federal Reserve Bank of Chicago.
  2. Griliches, Zvi, 1992. " The Search for R&D Spillovers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S29-47, Supplemen.
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  4. Tor Jakob Klette & Jarle Moen & Zvi Griliches, 1999. "Do Subsidies to Commercial R&D Reduce Market Failures - Microeconomic Evaluation Studies?," Harvard Institute of Economic Research Working Papers 1861, Harvard - Institute of Economic Research.
  5. Paul A. Gompers & Josh Lerner, 1999. "What Drives Venture Capital Fundraising?," NBER Working Papers 6906, National Bureau of Economic Research, Inc.
  6. Greenwald, Bruce & Stiglitz, Joseph E & Weiss, Andrew, 1984. "Informational Imperfections in the Capital Market and Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 74(2), pages 194-99, May.
  7. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  8. R. Glenn Hubbard, 1997. "Capital-Market Imperfections and Investment," NBER Working Papers 5996, National Bureau of Economic Research, Inc.
  9. Mansfield, Edwin, et al, 1977. "Social and Private Rates of Return from Industrial Innovations," The Quarterly Journal of Economics, MIT Press, vol. 91(2), pages 221-40, May.
  10. Devenow, Andrea & Welch, Ivo, 1996. "Rational herding in financial economics," European Economic Review, Elsevier, vol. 40(3-5), pages 603-615, April.
  11. 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.
  12. 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.
  13. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  14. Freear, John & Wetzel, William Jr., 1990. "Who bankrolls high-tech entrepreneurs?," Journal of Business Venturing, Elsevier, vol. 5(2), pages 77-89, March.
  15. Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
  16. Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
  17. Gompers, Paul & Lerner, Josh, 2000. "Money chasing deals? The impact of fund inflows on private equity valuation," Journal of Financial Economics, Elsevier, vol. 55(2), pages 281-325, February.
  18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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