The Staged Financing Selection Mechanism for Government to Maximize the Green Benefits of Start-Ups

Wenke Yang,Meile Tian,Lei Wang,Qianting Ma,Jie He

doi:10.1155/2021/9921355

Abstract

In this study, we investigate the most common forms of government grant in green start-ups, which are appropriation, interest-free bank loans, and tax subsidies. These mechanisms are used to mitigate the problem of higher research costs and sunk costs of start-ups on green innovation and help venture investors better monitor the business plan, asset use, and agency cost and regularly collect information of start-ups to retain the right to terminate financing projects and improve the efficiency of them. The aim of this work is to develop a theoretical model of the agency among the government, the venture capitalists who only pursue monetary income, the strategy investors who pursue strategic objectives and monetary income, and the entrepreneur who takes into account both the influence of different forms of government grant on entrepreneur financing at a different stage and the improved monitoring process of venture investors owe to the staged capital infusion of government. The model shows that the optimal staged financing decision is given when the first target of the government is to achieve social welfare optimization and the secondary goal of maximizing green benefits. Moreover, the model explains the optimal staged financing decision of venture investors and equity stake share in different rounds. Ultimately, we find the optimal staged financing portfolios for green start-ups to acquire venture investment, reduce the staged financing uncertainty, and help the government realize a national green innovation strategy.

Highlights

In the long run, accelerating green technology research and development (R&D) and transferring incubation have been the focus of innovation and entrepreneurship policy-making
We knew little about the internal mechanism of why there are higher research costs and sunk costs on green innovation than on general innovation research and how it would inhibit the enthusiasm of enterprises to develop green technology, transfer, and incubate green new products because of the popular creative destruction effect, “Schumpeter effect” [5]
We can acquire the same results of Proposition 1. us, we only presented the impacts of the monitoring intensity on the green benefits in Figure 4

Summary

Introduction

In the long run, accelerating green technology research and development (R&D) and transferring incubation have been the focus of innovation and entrepreneurship policy-making. Erefore, VIs and SIs determine the monitoring intensity ξV0 (0 < ξG0 V < ξV0 ) and ξS0, (0 < ξG0 S < ξS0), respectively (note that the green capital support of the government will improve the probability of investors to finance; the impact of the monitoring on the output value between venture investors and strategy investors remains steady). In the time T1, to make the green product marketization, we assume that the VIs and SIs are myopic in the sense that they do not care about the information they obtained in the period of [0, T1] as long as the first stage was successful when they decide whether to continue investing on this start-up.

Conclusions

Disclosure