Evolutionary interpretation of venture capital policy in Israel, Germany, UK and Scotland

Abstract

Summary and critique Most of the post-2000 research on VC policy implic-itly assumes that a central problem in creating a VC market is overcoming pre-existing market failure in the finance and support of start-ups. It is generally agreed that ex ante capital provisions (fund-of-funds), financial incentives (capital gains tax reduc-tion and guarantees) and institutional changes can push the system closer to VC market equilibrium. These sets of measures seem generally applicable, regardless of the structure and culture of the econ-omy or its institutions. Moreover, any type of econ-omic system, irrespective of its industrial or institutional configuration and stage of development, is expected to react positively to the setting up of new forms of intermediation and the removal of bar-riers to entrepreneurship. Another weakness of some of the traditional approaches is absence of an ex-plicit analysis of entrepreneurial cluster emergence. Empirical cases In this section, we consider four examples of inter-twined VC and innovation policies that deviated from what we term the ‘traditional’ approach. In all cases, the policy process and its outcomes have been shaped by a series of pre-conditions that can be investigated using the dynamic concepts of ‘emer-gence’ and ‘pre-emergence’ (Abernathy and Utter-back, 1978; Avnimelech and Teubal, 2006).