2 - Public venture capital across Europe: A 15-year perspective

Abstract

This chapter analyzes the role played by the ten national EU governments in the development of local venture capital (VC) markets in their respective countries in the period between 1989 and 2003. Multivariate analyses show that direct public investments in the VC industry are not related to the overall economic climate, and are negatively related to the attractiveness of stock markets. Private investments, on the other hand, are significantly and positively related to the overall economic climate and to the attractiveness of stock markets (measured by the number of net new listings). This provides evidence that public investments are less opportunistically driven by the economic climate, and therefore create a stabilizing effect on the VC industry as a whole. The results suggest that public investments in the VC industry stimulate investments in a category of companies that potentially have the most problems in finding financing from private sources. Governments can strengthen the VC industry in several ways such as by indirectly stimulating VC by improving the economic conditions, strengthening stock markets, providing strong minority shareholder protection, investing in research and innovation, or by promoting entrepreneurship.