Government venture capital in central and eastern Europe

Karsai, Judit

doi:10.1080/13691066.2018.1411040

Cited by 31 publications

(54 citation statements)

References 36 publications

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“…The operation of hybrid venture capital funds (i.e. funds combining private and public resources) is described in (Lovas-Mile, 2015;Lovas-Riz, 2016;Jáki-Molnár, 2017a;Karsai, 2018).…”

Section: State Subsidymentioning

confidence: 99%

How Does the State Destroy Incentives in Innovation Financing?

Berlinger¹

2019

Economy & finance

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We investigate the effect of state subsidy on the behavior of entrepreneur and venture capitalist in a double moral hazard and fixed investment model under positive externalities. We infer that investment subsidy and success fee improve the incentives, ease credit rationing, hence boost private financing, which explains the popularity of hybrid venture capital systems. The main disadvantage of these systems is, however, that the entrepreneur is encouraged to minimize his/her own capital investment and to ask for the maximal state subsidy available. It may happen that public sources go to entrepreneurs capable to finance their projects privately, so state subsidies increase state deficit (and private profits) without any effects on public welfare leaving other important areas underfinanced. We also prove that state guarantee definitely creates perverse incentives, hence it is not recommended in our model.

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“…The operation of hybrid venture capital funds (i.e. funds combining private and public resources) is described in (Lovas-Mile, 2015;Lovas-Riz, 2016;Jáki-Molnár, 2017a;Karsai, 2018).…”

Section: State Subsidymentioning

confidence: 99%

How Does the State Destroy Incentives in Innovation Financing?

Berlinger¹

2019

Economy & finance

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“…Particularly, EU public initiatives in VC industry are targeted to support the development of SMEs in general, especially in less developed countries, and to close the gap of financing for new, innovative enterprises [26]. As part of public support for VC conditions, there are several industries which are not eligible for financing [17]. Each member country has the right to amend the list of excluded industries as far this is in conformity with EU appropriate legislation.…”

Section: Factors Driven By Lps Profilementioning

confidence: 99%

“…Only their partners' knowledge and experience are differentiating them. Latvia as part of CEE has unmatured VC market with thin supply of innovative firms and small funds where the ability to specialize is questionable [17]. Because of that, it can be assumed that portfolios of Latvian VC funds are a mix of companies from different industries and with no high-technology firms' dominance.…”

Section: Figure 1 Factors Influencing Industry's For Investments Of Vmentioning

confidence: 99%

“…So, where do VCists invest? Previous research points to the lack of in-depth analysis of public equity schemes in CEE [17]. In response to that, the paper examines industries' preferences of Latvian VC funds established in the frame of the European Unions' 2007-2013 programming period.…”

Section: Introductionmentioning

confidence: 99%

“…The first one is chasing for the level of the US innovation system [12]. The second -to overcome the uneven distribution of VC in the EU and support the regions where there is no private VC [17]. The third is to broaden access to finances for small and medium enterprises (SME).…”

Section: Introductionmentioning

confidence: 99%

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Untitled

Matisone

Lāce

2019

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The paper presents the study of Latvian Venture Capital (VC) funds' investment trends in particular industries. The literature analysis reveals five main factors influencing VC funds' managers preferences towards particular industries: three external factors (existing clusters in the investment region; high growth industries; availability of other funding for companies from specific sectors) and two internal (factors driven by VC funds' limited partners profile; possession of specific industry related knowledge). The results of the practical part of the study show that 52% of Latvian VC funds' investments (total amount) went to Services sectors, 45% to Manufacturing and 3% to other industries. From the total amount invested in Services according to the classification of Eurostat, investments in High-tech knowledge-intensive sectors account for 46%, Knowledge-intensive services-for 10% and less knowledge-intensive sectors-for 44%. Breakdown of investments in Manufacturing is as follows: 26% in High-technology firms, 24% in Medium-high technology; 15% in Mediumlow technology and 35% in Low technology. Investment patterns of different Latvian VC funds' managers vary substantially. For example, investments in High-technology and High-tech knowledge-intensive sectors were made only by three of five Latvian fund managers. Other two invested heavily in Low Technology and Less knowledge-intensive sectors. Industry-related knowledge and experience accumulated in particular fund management team presumably is an explanation of the variances in the patterns.

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