IDEAS home Printed from https://ideas.repec.org/a/taf/veecee/v21y2019i1p121-131.html
   My bibliography  Save this article

Government venture capital research: fake science and bad public policy

Author

Listed:
  • Douglas Cumming
  • Sofia Johan

Abstract

We review statistical methods used to estimate the impact of crowding out of private venture capital (VC) by government VC. We review three types of failures that have plagued the VC literature and resulted in policy implications that are precisely the opposite of what the data actually indicate. The first failure involves the mistaken use of measures that give rise to country rankings where the best VC markets in the world are countries like Austria and Hungary, and the worst VC market in the world is the U.K. The second and more recent failure involves the use of data that do not predate the creation of government VC. The third type of failure involves not accounting for the nonrandom matching between entrepreneurs and government VC programs. We show that statistical inference in recent work that makes this latter mistake can give rise to remarkably incorrect conclusions; including, for example, a bizarre and clearly false inference that a market with more than 89% investment by government funds exhibits no evidence of displacement of private funds. In view of these issues, we offer suggestions for future research and raise some new questions that could guide policymakers in the future.

Suggested Citation

  • Douglas Cumming & Sofia Johan, 2019. "Government venture capital research: fake science and bad public policy," Venture Capital, Taylor & Francis Journals, vol. 21(1), pages 121-131, January.
    • Handle: RePEc:taf:veecee:v:21:y:2019:i:1:p:121-131
    DOI: 10.1080/13691066.2018.1558508
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13691066.2018.1558508
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13691066.2018.1558508?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Jing & Fan, Yueqi & Liu, Ye, 2024. "The effects of government venture capital: New evidence from China based on a two-sided matching structural model," Journal of Corporate Finance, Elsevier, vol. 84(C).
    2. Oh, Seunghwan & Jang, Pilseong & Kwak, Gihyun, 2022. "Enhancing the efficiency of governmental intervention in the venture capital market: The monitoring effect," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 450-463.
    3. Jeaneth Johansson & Malin Malmström & Joakim Wincent & Vinit Parida, 2021. "How individual cognitions overshadow regulations and group norms: a study of government venture capital decisions," Small Business Economics, Springer, vol. 56(2), pages 857-876, February.
    4. Fu, Xiaoqing Maggie & Harrison, Richard T. & Li, Dongfu Franco, 2022. "Venture capital investment in university spin-offs: Evidence from an emerging economy," Journal of Corporate Finance, Elsevier, vol. 74(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:veecee:v:21:y:2019:i:1:p:121-131. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TVEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.