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Taxation and Venture Capital Backed Entrepreneurship

  • Christian Keuschnigg

    ()

  • Søren Bo Nielsen

    ()

In recent years, venture capital has increasingly become a factor in the financing of new firms. We examine how the value of mature firms determines the incentives of entrepreneurs to start up new firms and of venture capitalists to finance and advise them. We examine how capital gains taxes as well as subsidies to start-up costs of new firms affect venture capital backed entrepreneurship. We also argue that dividend and capital gains taxes on mature firms have important consequences for start-up firms as well.

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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 11 (2004)
Issue (Month): 4 (08)
Pages: 369-390

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Handle: RePEc:kap:itaxpf:v:11:y:2004:i:4:p:369-390
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  1. Christian Keuschnigg, 2003. "Optimal Public Policy For Venture Capital Backed Innovation," University of St. Gallen Department of Economics working paper series 2003 2003-09, Department of Economics, University of St. Gallen.
  2. Keuschnigg, Christian & Nielsen, Soren Bo, 2003. "Taxation and Venture Capital-Backed Entrepreneurship," CEPR Discussion Papers 4097, C.E.P.R. Discussion Papers.
  3. Roger H. Gordon & Julie Berry Cullen, 2002. "Taxes and Entrepreneurial Activity: Theory and Evidence for the U.S," NBER Working Papers 9015, National Bureau of Economic Research, Inc.
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  8. Christian Keuschnigg & Søren Bo Nielsen, "undated". "Tax Policy, Venture Capital, and Entrepreneurship," EPRU Working Paper Series 00-18, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  9. Christian Keuschnigg & Søren Bo Nielsen, 2003. "Taxes and Venture Capital Support," CESifo Working Paper Series 1094, CESifo Group Munich.
  10. David de Meza & David C. Webb, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 281-292.
  11. Christian Keuschnigg, 2003. "Taxation of a Venture Capitalist With a Portfolio of Firms," University of St. Gallen Department of Economics working paper series 2003 2003-04, Department of Economics, University of St. Gallen.
  12. Roger H. Gordon, 1998. "Can High Personal Tax Rates Encourage Entrepreneurial Activity?," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 49-80, March.
  13. Christian Keuschnigg & Søren Bo Nielsen, 2002. "Start-ups, Venture Capitalists, and the Capital Gains Tax," CESifo Working Paper Series 742, CESifo Group Munich.
  14. Ueda, Masako, 2002. "Banks versus Venture Capital," CEPR Discussion Papers 3411, C.E.P.R. Discussion Papers.
  15. Kevin A. Hassett & R. Glenn Hubbard, 1996. "Tax Policy and Investment," NBER Working Papers 5683, National Bureau of Economic Research, Inc.
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  17. Poterba, James M., 1989. "Capital Gains Tax Policy Toward Entrepreneurship," National Tax Journal, National Tax Association, vol. 42(3), pages 375-89, September.
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  19. Audretsch, David B & Lehmann, Erik, 2002. "Debt or Equity? The Role of Venture Capital in Financing the New Economy in Germany," CEPR Discussion Papers 3656, C.E.P.R. Discussion Papers.
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  21. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-984.
  22. Oliver Hart, 2001. "Financial Contracting," Harvard Institute of Economic Research Working Papers 1924, Harvard - Institute of Economic Research.
  23. Samuel Kortum & Josh Lerner, 2000. "Assessing the Contribution of Venture Capital to Innovation," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 674-692, Winter.
  24. Hans-Werner Sinn, 1990. "The Vanishing Harberger Triangle," NBER Working Papers 3225, National Bureau of Economic Research, Inc.
  25. Robin Boadway & Jean-François Tremblay, 2003. "Public Economics and Startup Entrepreneurs," CESifo Working Paper Series 877, CESifo Group Munich.
  26. David de Meza, 2002. "Overlending?," Economic Journal, Royal Economic Society, vol. 112(477), pages F17-F31, February.
  27. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
  28. Casamatta, Catherine, 2002. "Financing and Advising: Optimal Financial Contracts with Venture Capitalists," CEPR Discussion Papers 3475, C.E.P.R. Discussion Papers.
  29. Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1991. "Optimal linear income taxation in models with occupational choice," Journal of Public Economics, Elsevier, vol. 46(2), pages 133-162, November.
  30. Steven N. Kaplan & Per Stromberg, 2001. "Venture Capitalists As Principals: Contracting, Screening, and Monitoring," NBER Working Papers 8202, National Bureau of Economic Research, Inc.
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  32. Lawrence H. Summers, 1989. "Tax Policy and the Economy, Volume 3," NBER Books, National Bureau of Economic Research, Inc, number summ89-1, Enero.
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