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What is the role of Government Venture Capital for innovation-driven entrepreneurship?

Author

Listed:
  • Marius Berger
  • Antoine Dechezleprêtre
  • Milenko Fadic

Abstract

Government Venture Capital (GovVC) has emerged as a policy tool to complement private venture capital (Private VC) by funding innovation-driven firms that might not attract traditional VC investment. This study analyses GovVC's role in OECD Member countries using comprehensive data on entrepreneurial firms, investors, and patents, with GovVC entities identified through surveys of ministry experts. The analysis shows that GovVC-funded firms are typically riskier than Private VC funded ones and generally demonstrate lower performance in securing follow-on funding and innovation output. However, when GovVCs partner with Private VC investors, these performance gaps diminish significantly. In co-investment scenarios, firms show comparable innovation and exit performance to those funded solely by Private VC. The findings indicate that GovVC can effectively direct capital to overlooked firms, particularly when working in partnership with private investors.

Suggested Citation

  • Marius Berger & Antoine Dechezleprêtre & Milenko Fadic, 2024. "What is the role of Government Venture Capital for innovation-driven entrepreneurship?," OECD Science, Technology and Industry Working Papers 2024/10, OECD Publishing.
    • Handle: RePEc:oec:stiaaa:2024/10-en
    DOI: 10.1787/6430069e-en
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    More about this item

    Keywords

    Entrepreneurship; Government Policy; Innovation; Venture Capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • 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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