Entrepreneurial financing: Program review and policy perspective
Keywords:
Entrepreneurial financing, Public venture capital, Funding gap, Investment readiness, Crowd outAbstract
Entrepreneurial financing3, such as publicly initiated venture capital or grant schemes, serves as an important policy instrument that aims to bridge the financing gap facing young, innovative businesses, a gap that is mainly due to higher risk and growing uncertainty, and to strategically promote the creation of new ventures through the revitalization of their venture capital industries. This study examines public venture capital initiatives in Australia, Canada, and Sweden, and discovered that all three countries actively foster their venture capital industry through the formation of funds or the provision of tax incentives. It is notable that the majority of financing initiatives heavily depend on supply-side measures rather than demand-driven policies that focus on stimulating private investment in technological innovations and discoveries. This paper discusses in-depth the policy impact of public financing initiatives and their subsequent side-effects raised in the process such as overlapping in funding structure across the country, lack of monitoring and evaluation for feedback, fragmentation across the government ministries and agencies, and competition with the private sector, which may cause inefficiency as a result of public intervention. Financial constraints may arise for many reasons, partly resulting from the lack of investment readiness of young entrepreneurs. This signals a policy shift towards the creation of market-driven demand away from the traditional supply-push approach, and is a grand challenge to policymakers in entrepreneurial financing. Attention is leaning towards the efficiency and effectiveness of these public-financing initiatives in terms of their policy roles. It is worth noting that policy should focus on generating synergy so available resources can be channeled into the early, risky stage of new ventures, working as a facilitator to the achievement of an intended policy goal.
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References
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http://www.eif.org/news_centre/publications/ eif_wp_2011_009_EU_Venture.pdf
20. Leleux, B., & Surlemont, B. (2001). Public versus private venture capital: Seeding or crowding out? A pan-European analysis. Journal of Business Venturing, 18(2003), 81-104.
21. Lerner, J. (2002). When bureaucrats meets entrepreneurs: The design of effective “public venture programmes”. The Economic Journal, 112, 73-84.
22. Lerner, J. (2009). Boulevard of broken dreams, why public efforts to boost entrepreneurship and venture capital have failed and what to do about it? New Jersey: Princeton University Press.
23. Lerner, J., & Watson, B. (2007). The public venture capital challenge: The Australian case. Venture Capital, 10(1), 1 -20.
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27. Rigby, J., & Ramlogan, R. (2012). Access to finance: Impacts of publicly supported venture capital and loan Guarantees (NESTA working paper No. 13/02). Retrieved from http://www.nesta.org.uk/sites/ default/files/access_to_finance_impacts_of_publicly_supported_venture_capital_and_loan_guarantees.pdf
28. Schuelke-Leech, B. (2012). Innovation finance: A synthesis of public funding and private financing of innovation. Retrieved from http://glennschool.osu.edu/faculty/schuelke-leech/BASchuelke-Leech_2012_Innovation_Finance_shifting_roles_revision_May_7_2012.pdf
29. Svensson, L. (2011). Practical monetary policy: Examples from Sweden and the United States. The Brookings Institution, 42(1), 289-352.
30. The Economist (2010, August 5). The global revival of industrial policy, picking winners, saving losers, industrial policy is back in fashion. Have Governments learned from past Failures? (Bachelor's thesis, Stockholm School of Economics). Retrieved from http://www.economist.com/node/16741 043
31. The Swedish Private Equity and Venture Capital (2011). Riskkapitalaktiviteten i Sverige helåret 2011.n (SVCA) Retrieved on April 26, 2012 from
http://svca.se/PageFiles/1756/Riskkapitalaktiviteten%20hel%C3%A5ret%202011.pdf
32. Uhrbom, M., & Krakowski, S. (2012). Public venture capital for Swedish innovation: Theory and practice. (Bachelor's thesis, Stockholm School of Economics). Retrieved from http://arc.hhs.se/download.aspx?MediumId=1594
33. United Nations (2009). Policy options and instruments for financing innovation: A practical guide to early-stage financing. Retrieved from http://www.unece.org/fileadmin/DAM/ceci/publications/fid2.pdf
34. United Nations (2007). Financing innovative development: Comparative review of the experiences of UNECE countries in early-stage financing. Retrieved from http://www.unece.org/fileadmin/DAM/ceci/publications/fid.pdf
35. Wallsten, S. J. (2000). The effects of government-industry R&D programs on private R&D: the case of the Small Business Innovation Research Program. Rand Journal of Economics, 31(1), 82-100.
2. AusIndustry (2012). Venture capital in Australia. Retrieved from http://www.ausindustry.gov.au/programs/venturecapital/iif/Pages/IIFVentureCapitalInAustralia.aspx
3. Australian Government (2011). Innovation investment fund (IIF) programme progress report. Retrieved from http://www. innovation.gov.au/industry/VentureCapital/Documents/InnovationInvestmentFundProgramProgressReport.pdf
4. Australian Venture Capital Association Ltd. (2005). Australian venture capital industry review: Improving the VCLP to Attract Global Capital (AVCAL). Retrieved from http://www.avcal.com.au/documents/ item/256
5. Brander, J. A. Egan, E. J., & Hellmann, T. F. (2008). Government sponsored versus private venture capital: Canadian evidence (NBER Working Paper No. 14029). Retrieved from http://www.nber.org/papers/ w14029.pdf?new_window=1 Brander, J. A., Du, Q., & Hellmann, T. F. (2010). The effects of government-sponsored venture capital: International evidence. Retrieved from http://strategy.sauder.ubc.ca/hellmann/pdfs/BranderDuHellmannJuly2012.pdf
6. Business Development Bank of Canada (2010). Venture capital industry review (BDC). Retrieved from https://www.bdc.ca/ EN/Documents/other/VC_Industry_Review_EN.pdf
7. Callegati, E., Grandi, S., & Napier, G. (2005). Business incubation and venture capital. An international survey on synergies and challenges. (Joint IPI/IKED Working Paper, January) Retrieved from http://www.insme.org/files/2203
8. Cumings, D. J., & MacIntosh, J. G. (2006). Crowding out private equity: Canadian evidence. Journal of Business Venturing, 21(5), 569-609.
9. Durufle, G. (2010). Government involvement in the venture capital industry international comparisons. Toronto, ON: Canadian Venture Capital and Private Equity Association (CVCA). Retrieved from https://www.cvca. ca/files/downloads/Government_Involvement_in_the_VC_Industry_Intl_Comparisons_May_2010.pdf
10. Engel, D., & Heger, D. (2005). Differences in public venture capital companies activities: Micro-econometric evidence for Germany. Retrieved from
ftp://zinc.zew.de/pub/zewdocs/veranstaltungen/inno_patenting_conf/EngelHeger.pdf
11. European Central Bank (2011). SMEs’ access for finance in the Euro area - September 2010 to February 2011 (EC). Retrieved from
https://www.ecb.europa.eu/pub/pdf/other/accesstofinancesmallmediumsizedenterprises
201104en.pdf??07d1dfb3352b46af93d38aee843821cd, and http://ec.europa.eu/enterprise/policies/finance/data/enterprise-finance-index/europeansurveys/ecb-surveys/index_en.htm
12. European Private Equity and Venture Capital Association (2012). 2012 Pan-European private equity and venture capital activity: Activity data on fundraising, investments and divestments (EVCA). Retrieved from http://www.evca.eu/me-dia/12067/2012_PanEuropean_PEVC_Activity.pdf
13. Godin, K. (2006). Public policy and entrepreneurship: Venture capitalism in British Columbia (Master’s thesis, Simon Fraser University). Retrieved from
http://s3.amazonaws.com/zanran_storage/www.sfu.ca/ContentPages/82593789.pdf
Griliches, Z. (1992). The search for R&D spillover (Working Paper No. 3768). Cambridge, MA: The national Bureau of economic research. Retrieved from
http://www.nber.org/chapters/c8349.pdf
14. Hood, N. (2000). Public venture capital and economic development: The Scottish experience, venture capital: An International Journal of Entrepreneurial Finance, 2(4), 313-341. http://dx.doi.org/10.1080/13691060050177013
15. House of Commons Science and Technology Committee (2013). Bridging the valley of death: Improving the commercialisation of research (Eighth Report of Session 2012-13, HC 348). The United Kingdom: The House of Commons. Retrieved from http://www.publications.parliament.uk/pa/ cm201213/cmselect/cmsctech/348/348.pdf
16. Hurwitz, S. A. (2013). Addressing Canada’s commercialization crisis and shortage of venture capital: Will the federal government’s solution work? Retrieved from http://timreview.ca/sites/default/files/article_PDF/Hurwitz_TIMReview_September2013.pdf
17. International Finance Corporation (2011). Public private equity partnerships: Accelerating the growth of climate related private equity investment (IFC). Retrieved from http://www.ifc.org/wps/wcm/connect/1df6f700499a4d62b9e9fba-8c6a8312a/Public%2BPrivate %2BEquity%2BPartnerships.pdf?MOD=AJPERES
18. International Organisation for Knowledge Economy and Enterprise Development (2007). The role of venture capital, global trends and issues from a Nordic perspective (IKED). Retrieved from http://www.iked.org/pdf/THE%20ROLE%20OF%20 VENTURE%20CAPITAL,GLOBAL%20TRENDS%20AND%20ISSUES.pdf
19. Kelly, R. (2011). The performance and prospects of European venture capital. European Investment Fund (EIF). (Working Paper 2011/09). Retrieved from
http://www.eif.org/news_centre/publications/ eif_wp_2011_009_EU_Venture.pdf
20. Leleux, B., & Surlemont, B. (2001). Public versus private venture capital: Seeding or crowding out? A pan-European analysis. Journal of Business Venturing, 18(2003), 81-104.
21. Lerner, J. (2002). When bureaucrats meets entrepreneurs: The design of effective “public venture programmes”. The Economic Journal, 112, 73-84.
22. Lerner, J. (2009). Boulevard of broken dreams, why public efforts to boost entrepreneurship and venture capital have failed and what to do about it? New Jersey: Princeton University Press.
23. Lerner, J., & Watson, B. (2007). The public venture capital challenge: The Australian case. Venture Capital, 10(1), 1 -20.
24. Mason, C. M., & Harrison, R. T. (2001). Investment readiness: A critique of government proposals to increase the demand for venture capital. Regional Studies, 35(7), 663-668. DOI: 10.1080/00343400120075939
25. OECD (2013). OECD review of innovation policy: Sweden 2012. Paris: OECD Publishing. http://dx.doi.org/10.1787/sti/9789264184893-en
26. OECD (2012). OECD science, technology and industry outlook 2012. Paris: OECD Publishing. http://dx.doi.org/10.1787/ sti_outlook-2012-en
27. Rigby, J., & Ramlogan, R. (2012). Access to finance: Impacts of publicly supported venture capital and loan Guarantees (NESTA working paper No. 13/02). Retrieved from http://www.nesta.org.uk/sites/ default/files/access_to_finance_impacts_of_publicly_supported_venture_capital_and_loan_guarantees.pdf
28. Schuelke-Leech, B. (2012). Innovation finance: A synthesis of public funding and private financing of innovation. Retrieved from http://glennschool.osu.edu/faculty/schuelke-leech/BASchuelke-Leech_2012_Innovation_Finance_shifting_roles_revision_May_7_2012.pdf
29. Svensson, L. (2011). Practical monetary policy: Examples from Sweden and the United States. The Brookings Institution, 42(1), 289-352.
30. The Economist (2010, August 5). The global revival of industrial policy, picking winners, saving losers, industrial policy is back in fashion. Have Governments learned from past Failures? (Bachelor's thesis, Stockholm School of Economics). Retrieved from http://www.economist.com/node/16741 043
31. The Swedish Private Equity and Venture Capital (2011). Riskkapitalaktiviteten i Sverige helåret 2011.n (SVCA) Retrieved on April 26, 2012 from
http://svca.se/PageFiles/1756/Riskkapitalaktiviteten%20hel%C3%A5ret%202011.pdf
32. Uhrbom, M., & Krakowski, S. (2012). Public venture capital for Swedish innovation: Theory and practice. (Bachelor's thesis, Stockholm School of Economics). Retrieved from http://arc.hhs.se/download.aspx?MediumId=1594
33. United Nations (2009). Policy options and instruments for financing innovation: A practical guide to early-stage financing. Retrieved from http://www.unece.org/fileadmin/DAM/ceci/publications/fid2.pdf
34. United Nations (2007). Financing innovative development: Comparative review of the experiences of UNECE countries in early-stage financing. Retrieved from http://www.unece.org/fileadmin/DAM/ceci/publications/fid.pdf
35. Wallsten, S. J. (2000). The effects of government-industry R&D programs on private R&D: the case of the Small Business Innovation Research Program. Rand Journal of Economics, 31(1), 82-100.
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Published
17-05-2017
How to Cite
Ham, J. J. (2017). Entrepreneurial financing: Program review and policy perspective. Journal SCIENCE AND TECHNOLOGY POLICIES AND MANAGEMENT, 5(1), 66–80. Retrieved from https://vietnamstijournal.net/index.php/JSTPM/article/view/121
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