The existing literature in both public economics and financial economics often fails to
consider how appropriate and effective public policy may be in promoting the venture
capital industry. Public economics has dealt extensively with the effect of taxes and
subsidies but has neglected the unique role of venture capitalists as active investors who
provide not only funding but added value. Financial economics has emphasized the special
role of the venture capitalist but has not focused on the real effects of venture capital
in industry equilibrium or the role of public policy. This volume in the CESifo Seminar
series brings together experts in public and financial economics to develop a
theoretically and empirically informed international policy perspective for an era in
which policymakers increasingly look to venture capital as a source of jobs, innovation,
and economic growth.
The chapters in part I analyze data on the levels of venture capital fundraising in
Europe, problems in the bank-oriented beginnings of German venture capital finance in the
1970s, and the inefficiency of Canadian labor-sponsored venture capital funds. Part II
looks at the effect of venture capital on labor market performance, the importance of exit
opportunities, and the effect of information inflows on the venture capital cycle. The
chapters in part III take the perspective of public economics, reviewing the role of
public policy in addressing potential market failures, improving the quality of venture
capital investments, and affecting entrepreneurial business activity through tax policy.
Vesa Kanniainen is Professor of Economics at the University of Helsinki.
Christian Keuschnigg is Professor of Public Economics at the University of St. Gallen,
Switzerland.
Endorsements
"Many governments today are striving to promote entrepreneurship and venture capital
investment. Numerous failed experiments around the globe over the past three decades make
clear that there are no easy recipes to accomplish these goals. This collection of essays
provides a thoughtful look at these important issues, with a particularly welcome emphasis
on the European experience."
--Josh Lerner, Jacob H. Schiff Professor of Investment Banking, Harvard Business School,
coauthor of The Venture Capital Cycle
"This book does a remarkable job of covering a difficult topic, thanks to a unique
collection of empirical and theoretical work from the finance and the public economics
fields. The special focus on the European context makes this book indispensable for
academics and policy makers."
--Catherine Casamatta, University of Toulouse
List of Participants xvii
I Venture Capital: Facts, Institutions, Issues
1
1 Financing Entrepreneurial Firms in Europe: Facts, Issues, and
Research Agenda
Laura Bottazzi and Marco Da Rin
Sample Chapter - Download PDF (131 KB) 3
2 The Genesis of Venture Capital: Lessons from the German Experience
Ralf Becker and Thomas Hellmann 33
3 Comparative Venture Capital Governance: Private versus Labour
Sponsored Venture Capital Funds
Douglas J. Cumming and Jeffrey G. MacIntosh 69
II The Impact of Venture Capital: Employment, Exits, Cycles
95
4 Venture Capital Investment and Labor Market Performance: A
Panel Data Analysis
Ansgar Belke, Rainer Fehn and Neil Foster 97
5 How Important Are Exits for Venture Capital Finance? Evidence from
Finland
Ari Hyytinen 127
6 Venture Cycles: Theory and Evidence
Thomas Gehrig and Rune Stenbacka 151
III Public Policy toward Entrepreneurship and Venture Capital
179
7 Public Economics and Start-Up Entrepreneurs
Robin Boadway and Jean-François Tremblay 181
8 Public Policy for Start-Up Entrepreneurship with Venture Capital and
Bank Finance
Christian Keuschnigg and Soren Bo Nielsen 221
9 Entrepreneurship and Taxation: Empirical Evidence
Harvey S. Rosen 251
Index
296 pp., 19 illus. Paperback
