Public Policy, Venture Capital, and Entrepreneurial Finance

Keuschnigg, Christian

doi:10.1002/9781118266908.ch23

Cited by 3 publications

(3 citation statements)

References 77 publications

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“…VC financing being more costly, it is not preferred by all firms equally. Keuschnigg (2009) considers a situation, characterized by certain parameter conditions, where entrepreneurs with low productivity prospects rely only on bank credits, as VC advice is not sufficiently valuable for them to warrant the extra cost. Firms with very high productivity find that the value of VC advice more than compensates for the larger cost of VC funding.…”

Section: Venture Capital Versus Bank Financingmentioning

confidence: 99%

Business Taxation, Corporate Finance, and Economic Performance

Keuschnigg

Ribi

2012

Oxford Handbooks Online

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This survey of recent research in corporate finance discusses how business taxes, subsidies as well as a country's institutional development affect several important decision margins of heterogeneous firms. We argue that innovative firms, as a result of agency problems between insiders and outside investors, are most frequently finance constrained. We discuss how profit taxes reduce investment of constrained firms by their effect on cash-flow, and of unconstrained firms by their effect on the user cost of capital. Moreover, tax reform as well as tax financed R&D subsidies can enhance aggregate investment, innovation and efficiency by implicitly redistributing profits towards constrained firms where capital earns the highest return. We argue that the corporate legal form improves firms' access to external funds. We then explain the firms' choice between venture capital and bank financing and discuss how business taxation can affect venture capital financing on both the extensive and intensive margins. Finally, we review theory and evidence on how corporate finance may shape a country's comparative advantage in innovative industries as well as aggregate labor market performance when part of firms are finance constrained.

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Section: Venture Capital Versus Bank Financingmentioning

confidence: 99%

Business Taxation, Corporate Finance, and Economic Performance

Keuschnigg

Ribi

2012

Oxford Handbooks Online

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“…Notwithstanding the importance of the money provided by PE/VC firms the invested companies also benefit from a whole package of strategic non-financial resources that helps build successful enterprises and foster the blossom and development of highly innovative startups and SMEs: monitoring and performance tools, management professionalization, compensation arrangements, board of directors, budget structure, well established and high level networking, mentoring and advice to entrepreneurs, etc (Gorman and Sahlman 1989;Dotzler 2001;Gompers and Lerner, 2001b;Gompers and Lerner 2002;Keuschnigg, 2009). According to Bloom, Sadun and Van Reenen (2009), on average PE/VC-backed enterprises are better managed than non-PE/VC backed ones.…”

Section: Literature Reviewmentioning

confidence: 99%

“…According to Keuschnigg (2009) policy makers have been fostering favorable conditions through PE/VC to creating businesses. Gompers (1994) remembers the importance of the changes in the 1979 Employee Retirement Income Security Act (ERISA) and the consequent increase of pension funds" commitments to PE/VC in the U.S. Hirukawa and Ueda (2008) highlight the Yozma program in Israel and the Small Business Investment Company (SBIC) in the U.S., while Lerner (2002) agrees that government is highly interested on fostering innovation and support the PE/VC activity is a natural way to accomplish that goal.…”

Section: Literature Reviewmentioning

confidence: 99%

Fostering Innovation and Entrepreneurship in Brazil Through Private Equity and Venture Capital Public Policies

Ramalho

2010

SSRN Journal

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It is well documented the positive impact of the Private Equity and Venture Capital (PE/VC) industry on the creation and development of highly successful innovative companies in a few countries, mainly in the United States. PE/VC firms provide not only capital to startups and small and medium enterprises (SMEs) that usually have financing gap, especially in emerging markets, but also strategic resources that enable these enterprises to commercialize innovation. As consequence, government incentive and nurture of local PE/VC industries would be expected in emerging economies due to innovation"s importance to economic growth.

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Social Enterprise Under Moral Hazard: Who Gets State Subsidies and Active Financing?

Lovas,

Berlinger,

Tóth

2024

Eur J Dev Res

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We develop a double-sided moral hazard model of social entrepreneurship and derive the optimal state subsidy. Then, we analyze the data of an EU-funded training and mentoring program aiming at preparing social entrepreneurs for private financing. Using content analysis techniques, we investigate the 203 applications for the program, the reviewers’ evaluation, and the selection decision. Social enterprises produce private and public benefits, use market and non-market resources, and involve a wide range of stakeholders with different incentives. We examine why different projects can get active financing (financing plus advisory), or only passive financing (financing without advisory), or no financing at all. We identify five relevant selection criteria such as entrepreneurial net present value, entrepreneurial agency cost, advisory net present value, advisory agency cost, and the external effects of the project. Empirical findings are consistent with the theoretical model. Applicants with higher scores in business plan, social impact, and geographical scope were significantly more likely to be selected, especially if their activities required no domain-specific knowledge from the advisors. However, higher agency costs, reflected in too many business lines and early-stage operations, seem to reduce the chances significantly. We formulate a moral hazard model for social entrepreneurship with four simultaneously optimizing players: an entrepreneur, an investor, an advisor, and the state. With the help of our unique database, we get valuable insights into the financing decisions of a profit-seeking investor. Our findings can contribute to the improvement of the design of state-subsidized social entrepreneurship programs.

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Public Policy, Venture Capital, and Entrepreneurial Finance

Cited by 3 publications

References 77 publications

Business Taxation, Corporate Finance, and Economic Performance

Business Taxation, Corporate Finance, and Economic Performance

Fostering Innovation and Entrepreneurship in Brazil Through Private Equity and Venture Capital Public Policies

Social Enterprise Under Moral Hazard: Who Gets State Subsidies and Active Financing?

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