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Public Venture Capital and Entrepreneurship

Author

Listed:
  • Oana Secrieru
  • Marianne Vigneault

Abstract

Entrepreneurship is a key factor in promoting growth in output and employment. Consequently, to encourage new start-ups, most governments in developed countries have public venture capital programs. The authors develop a model that endogenously determines the number of entrepreneurs and the optimal quantity of financing and managerial advice provided by a public venture capital program. Their analysis is based on a model of occupational choice that has informational asymmetries regarding the ability of entrepreneurs. The authors identify circumstances under which over- or underinvestment can occur. They also show that the equilibrium is characterized by an inefficient number (too many or too few) of less-able entrepreneurs. Furthermore, the authors find that the government faces disincentives in providing small amounts of managerial advice; larger amounts of such advice may be optimal.

Suggested Citation

  • Oana Secrieru & Marianne Vigneault, 2004. "Public Venture Capital and Entrepreneurship," Staff Working Papers 04-10, Bank of Canada.
  • Handle: RePEc:bca:bocawp:04-10
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    References listed on IDEAS

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    Cited by:

    1. Sunny Hahn & Jina Kang, 2017. "Complementary or conflictory?: the effects of the composition of the syndicate on venture capital-backed IPOs in the US stock market," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(1), pages 77-102, March.
    2. Julia Hirsch & Uwe Walz, 2013. "Why do contracts differ between venture capital types?," Small Business Economics, Springer, pages 511-525.
    3. Hirsch, Julia & Walz, Uwe, 2006. "Why do contracts differ between VC types? Market segmentation versus corporate governance varieties," CFS Working Paper Series 2006/12, Center for Financial Studies (CFS).
    4. James A. Brander & Edward Egan & Thomas F. Hellmann, 2010. "Government Sponsored versus Private Venture Capital: Canadian Evidence," NBER Chapters,in: International Differences in Entrepreneurship, pages 275-320 National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Financial markets; Fiscal policy; Labour markets;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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