TY - JOUR AU - Brander,James A. AU - Egan,Edward AU - Hellmann,Thomas F. TI - Government Sponsored versus Private Venture Capital: Canadian Evidence JF - National Bureau of Economic Research Working Paper Series VL - No. 14029 PY - 2008 Y2 - May 2008 UR - http://www.nber.org/papers/w14029 L1 - http://www.nber.org/papers/w14029.pdf N1 - Author contact info: James A. Brander University of British Columbia Faculty of Commerce 2053 Main Mall Vancouver, B.C. V6T 1Z2 CANADA Tel: 604/822-8483 Fax: 604/822-8477 E-Mail: brander@sauder.ubc.ca Edward Egan University of California at Berkeley E-Mail: ed_egan@haas.berkeley.edu Thomas F. Hellmann Sauder School of Business University of British Columbia 2053 Main Mall Vancouver, BC V6T 1Z2 CANADA Tel: 604/822-8476 Fax: 604/822-8477 E-Mail: hellmann@sauder.ubc.ca M1 - published as James A. Brander, Edward Egan, Thomas F. Hellmann. "Government Sponsored versus Private Venture Capital: Canadian Evidence," in Josh Lerner and Antoinette Schoar, editors, "International Differences in Entrepreneurship" University of Chicago Press (2010) M3 - presented at "International Differences in Entrepreneurship", February 1-2, 2008 AB - This paper investigates the relative performance of enterprises backed by government-sponsored venture capitalists and private venture capitalists. While previous studies focus mainly on investor returns, this paper focuses on a broader set of public policy objectives, including value-creation, innovation, and competition. A number of novel data-collection methods, including web-crawlers, are used to assemble a near-comprehensive data set of Canadian venture-capital backed enterprises. The results indicate that enterprises financed by government-sponsored venture capitalists underperform on a variety of criteria, including value-creation, as measured by the likelihood and size of IPOs and M&As, and innovation, as measured by patents. It is important to understand whether such underperformance arises from a selection effect in which private venture capitalists have a higher quality threshold for investment than subsidized venture capitalists, or whether it arises from a treatment effect in which subsidized venture capitalists crowd out private investment and, in addition, provide less effective mentoring and other value-added skills. We find suggestive evidence that crowding out and less effective treatment are problems associated with government-backed venture capital. While the data does not allow for a definitive welfare analysis, the results cast some doubt on the desirability of certain government interventions in the venture capital market. ER -