Government Officials or Mixed Institutions: How do Ventures Acquire Public Sector Investment in Emerging Economies?

Abstract

Research Summary: Governments in emerging economies often use institutional intermediaries to promote entrepreneurship, and bridge the void between ventures and public funding. While prior literature describes what institutional intermediaries do, it leaves open how intermediaries support different types of entrepreneurs. By comparing science park and non-science park firms in Beijing and across China, we distinguish which entrepreneurs benefit from certification v. capability-building through the introduction of two new constructs: skill adequacy and context relevance. Broadly, our study adds insights at the nexus of emerging economies and entrepreneurship research, and to the tie formation and institutional intermediaries literatures.Managerial Summary: A key dilemma facing entrepreneurs is how to finance their ventures. While entrepreneurs in developed economies can seek VC or angel investment, entrepreneurs in emerging economies often need to pursue potential government funding opportunities. Our study highlights three strategies for acquiring government funding. Well-connected entrepreneurs can leverage their political ties to acquire such funding. Less-connected entrepreneurs can leverage science parks that in emerging markets are designed to help governments to identify promising ventures. For returnees whose ample experience abroad may not fit with local ways of doing business, gaining science park admission can certify quality and so ease the path to government funding. For technically skilled local entrepreneurs who lack business skills, science parks can help build such skills which then ease the path to government funding.