Working Paper: NBER ID: w28744
Authors: Jessica Bai; Shai Bernstein; Abhishek Dev; Josh Lerner
Abstract: This paper examines the interaction between governments and private capital investors when financing early-stage ventures. We first provide a simple conceptual framework to explore when collaboration between governments and private investors is likely to emerge. Using hand-collected data on 755 programs worldwide, we find that government programs frequently involve private capital investors. Collaboration is greater when governments are more effective, when programs target earlier-stage companies, and when the local private venture market is more developed. Such collaborations mostly occur through joint equity investments and matching-funds requirements. These findings underscore the importance of government synergies with local private capital markets.
Keywords: government investment; private capital; entrepreneurial finance; venture capital; innovation
JEL Codes: G24; H81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government effectiveness (H11) | Collaboration with private capital investors (O36) |
| Development of local private venture market (O16) | Collaboration with private capital investors (O36) |
| Government policies (H59) | Structure of funding (joint equity investments and matching fund requirements) (G23) |
| Governance quality (H11) | Private sector engagement in public funding initiatives (O36) |
| Cost of search for venture capital funding (G24) | Likelihood of co-investment funding (G31) |
| Public entrepreneurial finance programs (H81) | Innovation and entrepreneurial activity (O35) |