THE ROLE OF GOVERNMENT IN ENTREPRENEURIAL FINANCE: VENTURE CAPITAL INVESTING AND INNOVATION

Abstract

The use of venture capital has been discussed extensively in recent years as an alternative source of funding for start-ups to meet their financial needs. The contribution of venture capitalists to the overall business development of companies has been highlighted in this debate. This paper presents a research framework to identify the innovation indicators in terms of the role of government in their creation that influence venture capital investment. The relationship between innovation as measured by ease of business creation, ease of resolving insolvency, current expenditure on education, ICT (information and communication technology) use, ease of getting credit, domestic financial resources to private sector, protection of minority investors, knowledge-intensive employment, exports of creative goods, domestic patent applications and venture capital investment is examined for OECD countries over the ten-year period between 2012 and 2021. The results show that the main determinants of innovation that affect venture capital investment are ease of insolvency procedures, ease of access to credit, current expenditure on education, use of ICT, knowledge-intensive employment, exports of creative goods and GDP per capita.