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Risk financing for knowledge-based enterprises: Mechanisms and policy options

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  • Guy Ben-Ari
  • Nicholas S Vonortas

Abstract

New knowledge-based enterprises have several characteristics that limit their options for obtaining financing from external sources: they have little or no collateral, their assets tend to be intangible, and the value of their innovations is hard to calculate. For these reasons, entrepreneurs in the more knowledge-intensive fields tend to rely largely on equity financing. This is a more ‘patient’ form of capital for early stage operations with returns linked directly to firm earnings. Using examples from various countries, this paper surveys the various mechanisms for risk financing and the complementary, yet constantly evolving, roles of business angels, venture capital firms, and government programs in such financing. Copyright , Beech Tree Publishing.

Suggested Citation

  • Guy Ben-Ari & Nicholas S Vonortas, 2007. "Risk financing for knowledge-based enterprises: Mechanisms and policy options," Science and Public Policy, Oxford University Press, vol. 34(7), pages 475-488, August.
    • Handle: RePEc:oup:scippl:v:34:y:2007:i:7:p:475-488
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    File URL: http://hdl.handle.net/10.3152/030234207X244829
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    References listed on IDEAS

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    1. Da Rin, Marco & Nicodano, Giovanna & Sembenelli, Alessandro, 2006. "Public policy and the creation of active venture capital markets," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1699-1723, September.
    2. Paul A. Gompers & Josh Lerner, 1998. "What Drives Venture Capital Fundraising?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998 Micr), pages 149-204.
    3. Di Gregorio, Dante & Shane, Scott, 2003. "Why do some universities generate more start-ups than others?," Research Policy, Elsevier, vol. 32(2), pages 209-227, February.
    4. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Wioletta Czemiel-Grzybowska, 2014. "Selected Constraints To Development Of Entrepreneurship In Poland," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 10(2), pages 21-27, August.
    2. Pawe³ Kliber, 2014. "Estimation Of Risk Neutral Measure For Polish Stock Market," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 10(2), pages 28-37, August.
    3. Patryk Koc & Wojciech Pander & Richard Woodward & Deniz Eylem Yoruk, 2010. "Knowledge-based entreprenuership in Poland," CASE Network Studies and Analyses 408, CASE-Center for Social and Economic Research.
    4. Beom Cheol Cin & Young Jun Kim & Nicholas S. Vonortas, 2017. "The impact of public R&D subsidy on small firm productivity: evidence from Korean SMEs," Small Business Economics, Springer, vol. 48(2), pages 345-360, February.
    5. Robert Gampfer & Jessica Mitchell & Blagoy Stamenow & Jana Zifciakova & Koen Jonkers, 2016. "Improving access to finance: which schemes best support the emergence of high-growth innovative enterprises? A mapping, analysis and assessment of finance instruments in selected EU Member States," JRC Research Reports JRC102928, Joint Research Centre.

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