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.
About the Editors
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.
"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