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Plugging the knowledge gap: An international comparison of the role for policy in the venture capital market

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  • Rebecca Harding

Abstract

This paper examines the role of policy in creating venture capital structures that support innovative, high growth companies. It compares the policy challenges and the emerging structures and measures in the US, Germany, Singapore, France, Ireland, the Netherlands and the UK. It argues that policies to stimulate the demand for venture capital are more effective in overcoming inherent information asymmetries in venture capital market. These information asymmetries take the form of risk aversion on the supply side and uncertainty and resistance to venture capital on the demand side. The result is a gap in funding for high growth businesses. Narrowing this gap--often called the equity gap--has been a target of policy makers in the countries studied. The paper provides evidence to demonstrate that the equity gap is actually the measurable outcome of this information asymmetry, or 'knowledge gap' and that policy has been most effective in countries which have approached the development of a venture capital market through demand rather than supply side measures.

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  • Rebecca Harding, 2002. "Plugging the knowledge gap: An international comparison of the role for policy in the venture capital market," Venture Capital, Taylor & Francis Journals, vol. 4(1), pages 59-76, January.
    • Handle: RePEc:taf:veecee:v:4:y:2002:i:1:p:59-76
    DOI: 10.1080/13691060110093019
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    Cited by:

    1. Becsky-Nagy Patricia, 2013. "Venture Capital In Hungarian Academic Spin-Offs," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 351-360, December.
    2. Becsky-Nagy, Patrícia & Fazekas, Balázs, 2017. "Résen van-e az állam?. Az állami szerepvállalás hatása a kockázati tőke keresleti oldalára [Is the state on the ball?. The effect of the state s role on the demand side of venture capital]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 507-527.
    3. Marshall, Maria I. & Samal, Ananya, 2006. "The Effect Of Human And Financial Capital On The Entrepreneurial Process: An Urban-Rural Comparison Of Entrepreneurs In Indiana," Staff Papers 28651, Purdue University, Department of Agricultural Economics.
    4. Arena, Marika & Bengo, Irene & Calderini, Mario & Chiodo, Veronica, 2018. "Unlocking finance for social tech start-ups: Is there a new opportunity space?," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 154-165.
    5. Balázs FazekasBalázs Fazekas, 2016. "Value-Creating Uncertainty – A Real Options Approach in Venture Capital," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 15(4), pages 151-166.
    6. Maunula, Mari, 2006. "The Perceived Value-added of Venture Capital Investors. Evidence from Finnish Biotechnology Industry," Discussion Papers 1030, The Research Institute of the Finnish Economy.
    7. László Szerb & Gábor Rappai & Zsolt Makra & Siri Terjesen, 2007. "Informal Investment in Transition Economies: Individual Characteristics and Clusters," Small Business Economics, Springer, vol. 28(2), pages 257-271, March.
    8. Iman Seoudi, 2015. "Public Policy For Venture Capital: An Integrated Framework," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 9(4), pages 31-51.
    9. Ron Martin & Christian Berndt & Britta Klagge & Peter Sunley, 2005. "Spatial Proximity Effects and Regional Equity Gaps in the Venture Capital Market: Evidence from Germany and the United Kingdom," Environment and Planning A, , vol. 37(7), pages 1207-1231, July.
    10. Iman Seoudi & Salma Mahmoud, 2016. "Public Policy For Venture Capital: A Comparative Study Of Emirates, Saudi Arabia And Egypt," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 7(1), pages 19-42.
    11. Kosztopulosz, Andreász & Makra, Zsolt, 2004. "Az üzleti angyalok szerepe a növekedni képes kisvállalkozások fejlesztésében Magyarországon [The role of business angels in developing small firms in Hungary with growth potential]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 717-739.
    12. Cécile Carpentier & Jean-Marc Suret, 2005. "The Indirect Costs of Venture Capital in Canada," CIRANO Working Papers 2005s-25, CIRANO.
    13. Schilder, Dirk, 2006. "Public venture capital in Germany: task force or forced task?," Freiberg Working Papers 2006/12, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    14. Anita Matisone & Natalja Lace, 2021. "Effective Venture Capital Market Development Concept," JOItmC, MDPI, vol. 7(4), pages 1-29, November.
    15. Lange, Knut & Müller-Seitz, Gordon & Sydow, Jörg & Windeler, Arnold, 2013. "Financing innovations in uncertain networks—Filling in roadmap gaps in the semiconductor industry," Research Policy, Elsevier, vol. 42(3), pages 647-661.
    16. Andrew Watkins, 2010. "The Venture Capital Perspective on Collaboration with Large Corporations/MNEs in London and the South East: Pursuing Extra‐Regional Knowledge and the Shaping of Regional Venture Capital Networks?," Review of Policy Research, Policy Studies Organization, vol. 27(4), pages 491-507, July.
    17. Elisa Salvador & Rebecca Harding, 2006. "Innovation Policy at the Regional Level: the Case of Wales," Post-Print hal-02550826, HAL.

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