The Impact of Public Subsidies on Venture Capital Investments in Start-Up Enterprises

The relationship between a venture capitalist and an entrepreneur is modeled to investigate the impact of public subsidies on venture capital investments in start-up enterprises. In this model, the venture capitalist only finances start-up enterprises if he has sufficient expertise to make high-risk investments in new technology profitable in terms of their expected value. It is shown that a venture capitalist who already has sufficient expertise reduces his management support in the start-up enterprise under a public subsidy. Moreover, venture capitalists who do not have sufficient expertise may finance start-up enterprises if future losses of the start-up investment are partly covered by the government.

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Year of publication:	2000
Authors:	Schertler, Andrea
Publisher:	Kiel : Kiel Institute of World Economics (IfW)
Subject:	Risikokapital \| Unternehmensgründung \| Investition \| Finanzierung \| Investitionspolitik \| Subvention \| Moral Hazard \| Theorie \| venture capital \| double-sided moral hazard \| public subsidies \| start-up investments

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Series:	Kiel Working Paper ; 1018
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	859674258 [GVK] hdl:10419/17715 [Handle] RePEc:zbw:ifwkwp:1018 [RePEc]
Classification:	L14 - Transactional Relationships; Contracts and Reputation; Networks ; G28 - Government Policy and Regulation ; G24 - Investment Banking; Venture Capital; Brokerage ; D82 - Asymmetric and Private Information
Source:	EconStor

Persistent link: https://www.econbiz.de/10010260453