The Effects of Government-Sponsored Venture Capital: International Evidence

James A. Brander, Qianqian Du, Thomas F. Hellmann

NBER Working Paper No. 16521
Issued in November 2010
NBER Program(s):   CF

This paper examines the impact of government-sponsored venture capitalists (GVCs) on the success of enterprises. Using international enterprise-level data, we identify a surprising non-monotonicity in the effect of GVC on the likelihood of exit via initial public offerings (IPOs) or third party acquisitions. Enterprises that receive funding from both private venture capitalists (PVCs) and GVCs outperform benchmark enterprises financed purely by private venture capitalists if only a moderate fraction of funding comes from GVCs. However, enterprises underperform if a large fraction of funding comes from GVCs. Instrumental variable regressions suggest that endogeneity in the form of unobservable selection effects cannot account for these effects of GVC financing. The underperformance result appears to be largely driven by investments made in times when private venture capital is abundant. The outperformance result applies only to venture capital firms that are supported but not owned outright by governments.

download in pdf format
   (190 K)

email paper

A non-technical summary of this paper is available in the April 2011 NBER digest.  You can sign up to receive the NBER Digest by email.

This paper is available as PDF (190 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16521

James Brander, Qianqian Du and Thomas Hellmann (2013), “The Effects of Government-Sponsored Venture Capital: International Evidence”, forthcoming, Review of Finance

Users who downloaded this paper also downloaded these:
Lerner w5753 The Government as Venture Capitalist: The Long-Run Effects of the SBIR Program
Bottazzi, Da Rin, and Hellmann w16923 The Importance of Trust for Investment: Evidence from Venture Capital
Da Rin, Hellmann, and Puri w17523 A survey of venture capital research
Acharya, Baghai, and Subramanian w16484 Labor Laws and Innovation
Kalemli-Ozcan, Kamil, and Villegas-Sanchez w16528 What Hinders Investment in the Aftermath of Financial Crises: Insolvent Firms or Illiquid Banks?
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us