Government Sponsored Versus Private Venture Capital: Canadian Evidence - NBER Working Paper

Summary:
Paper investigating the relative performance of enterprises backed by government-sponsored venture capitalists and private venture capitalists. Results indicate that enterprises financed by government-sponsored venture capitalists underperform on a variety of criteria, including value-creation and innovation. Arises in part from a selection effect and in part from a treatment effect. Results cast doubt on the desirability of certain government interventions in the venture capital market. (Published: 05/08)


Notes:

• Only abstract; paper requires purchasing.
• Study focuses on a broader set of public policy objectives:
  
• value-creation, innovation, and competition
• Enterprises financed by government-sponsored venture capitalists underperform on a variety of criteria:
• value-creation: as measured by the likelihood and size of IPOs and M&As
• innovation: as measured by patents
• Cause 1: selection effect
• private venture capitalists have a higher quality threshold for investment than subsidized venture capitalists
• Cause 2: treatment effect
• subsidized venture capitalists crowd out private investment
• subsidized venture capitalists provide less effective mentoring and other value-added skills