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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.
Year of publication:
2000
Authors: Schertler, Andrea
Publisher: Kiel : Kiel Institute for the World Economy (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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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
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