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

Published: The Effects of Government-Sponsored Venture Capital: International Evidence* James A. Brander1, Qianqian Du2 and Thomas Hellmann3 Review of Finance (2014) doi: 10.1093/rof/rfu009 citation courtesy of

Users who downloaded this paper also downloaded these:
Aizenman and Kendall w14344 The Internationalization of Venture Capital and Private Equity
Brander, Egan, and Hellmann w14029 Government Sponsored versus Private Venture Capital: Canadian Evidence
Da Rin and Fabiana Penas w13636 The Effect of Venture Capital on Innovation Strategies
Metrick and Yasuda w16652 Venture Capital and Other Private Equity: A Survey
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