The Effects Of Government-Sponsored Venture Capital: International Evidence
This paper examines the impact of Government-sponsored Venture Capitalists (GVCs) on the success of enterprises. Using international enterprise-level data, the authors identify a surprising non-monotonicity in the effect of GVC on the likelihood of exit via Initial Public Offerings (IPOs) or third party acquisitions. Enterprises that receive funding from both Private Venture Capitalists (PVCs) and GVCs outperform benchmark enterprises financed purely by private venture capitalists if only a moderate fraction of funding comes from GVCs. However, enterprises underperform if a large fraction of funding comes from GVCs. Instrumental variable regressions suggest that endogeneity in the form of unobservable selection effects cannot account for these effects of GVC financing.