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Institutional Barriers to Financing Technology-based Small Firms through Venture Capital Mechanism: A Study to Explore the Incentives for Investment in Iran

Author

Listed:
  • Motavaseli Mahmood

    (Faculty of Economics, University of Tehran, Iran)

  • Shojaei Saeed

    (Faculty of Entrepreneurship Management, University of Tehran, Iran,)

  • Bitaab Ali

    (Research Institute for Science, Technology and Industry Policy, Sharif University of Technology, Iran,)

  • Hasti Chitsazan

    (Faculty of Entrepreneurship Management, University of Tehran, Iran,)

  • Ghanbar Mohammadi Elyasi

    (Faculty of Entrepreneurship Management, University of Tehran, Iran.)

Abstract

There is a consensus among scholars that access to financial sources is vital for Technology-Based Small Firms (TBSFs). Venture Capital (VC) financing is the most appropriate external financial source for them. However, VC industry is underdeveloped in most developing countries, e.g. Iran. This paper seeks to discover the causes for lack of incentives for VC investment based on institutional theory. In this regard, institutional obstacles constraining the incentives for VC investment in Iran were investigated through conducting 31 detailed interviews. The results suggest that the institutional set-up in Iran motivates the investment in tangible assets, short term projects, large investment schemes and intransparent project rather than TBSFs. Many institutional factors were identified which decrease the incentives for VC investment as: Information disclosure institutions, tax regulations, labor regulations, fiscal institutions, political institutions, commerce and competition regulation, property rights and financial market regulation. Finally, results are discussed and concluded in table 3.

Suggested Citation

  • Motavaseli Mahmood & Shojaei Saeed & Bitaab Ali & Hasti Chitsazan & Ghanbar Mohammadi Elyasi, 2018. "Institutional Barriers to Financing Technology-based Small Firms through Venture Capital Mechanism: A Study to Explore the Incentives for Investment in Iran," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 184-195.
    • Handle: RePEc:eco:journ1:2018-01-25
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    2. Ebenezer Boateng & Peterson Owusu Junior & John G. Gatsi & Adam M. Anokye & Mac Junior Abeka & Emmanuel Asafo‐Adjei, 2024. "Institutions and venture capital market development in sub‐Saharan Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 1381-1406, March.

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    More about this item

    Keywords

    Venture Capital; Technology-Based Small Firm; Incentives for investment.;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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