The Impact of Public Subsidies on Venture Capital Investments in Start-Up Enterprises

Arbeitspapier

The relationship between a venture capitalist and an entrepreneur is modeled to investigate the impact of public subsidies on venture capital investments in start-up enterprises. In this model, the venture capitalist only finances start-up enterprises if he has sufficient expertise to make high-risk investments in new technology profitable in terms of their expected value. It is shown that a venture capitalist who already has sufficient expertise reduces his management support in the start-up enterprise under a public subsidy. Moreover, venture capitalists who do not have sufficient expertise may finance start-up enterprises if future losses of the start-up investment are partly covered by the government.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1018

Classification and Topics

• Classification: Wirtschaft ; Transactional Relationships; Contracts and Reputation; Networks ; Financial Institutions and Services: Government Policy and Regulation ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Asymmetric and Private Information; Mechanism Design
• Subject: venture capital ; double-sided moral hazard ; public subsidies ; start-up investments ; Risikokapital ; Unternehmensgründung ; Investition ; Finanzierung ; Investitionspolitik ; Subvention ; Moral Hazard ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schertler, Andrea
• Event: Veröffentlichung
• (who): Kiel Institute of World Economics (IfW)
• (where): Kiel
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/17715
• Last update: 10.03.2025, 11:41 AM CET