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The Genesis of Venture Capital - Lessons from the German Experience

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  • Ralf Becker
  • Thomas Hellmann

Abstract

Why does venture capital work in some countries but not in others? This clinical study of the first German venture capital firm examines the difficulties of creating a venture capital market in a bank-based financial system. The analysis identifies the problem of creating appropriate governance structures to protect investor returns. It exposes the difficulties of established banks - not to mention government - to devise venture investment strategies. It identifies the availability of high quality entrepreneurs as a critical complement. And it provides a reinterpretation of the hypothesis of Black and Gilson (1997), arguing that the existence of an active stock market is a necessary, but by no means sufficient condition for the development of venture capital.

Suggested Citation

  • Ralf Becker & Thomas Hellmann, 2003. "The Genesis of Venture Capital - Lessons from the German Experience," CESifo Working Paper Series 883, CESifo.
    • Handle: RePEc:ces:ceswps:_883
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    References listed on IDEAS

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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