The Impact of Foreign Venture Capital Intervention on Venture Capital Innovation of Startup Entrepreneurs Using Propensity Score Matching Model

The research expects to give full play to the role of venture capital in corporate innovation and enhance the development capability of enterprises. Based on Propensity Score Matching (PSM) model, the characteristics of venture capital and startup enterprises are analyzed, and the innovation of venture capital is discussed. Next, the PSM model is used to analyze the innovation of venture capital intervention in enterprises from risk probability intervention, probability evaluation, matching equilibrium validity test, matching results analysis, different venture capital, and different background risks. The results show that the difference of standardized mean is close to 0, which accords with the equilibrium test. The significant impact of venture capital intervention on the Number of Invention Patent Applications (NIPA) and Number of Utility Model Patent Applications (NUMPA) is 0.1 and 0.01, respectively. Venture capital intervention has a significantly positive impact on NIPA and NUMPA but has no significant positive impact on Number of Design Patent Applications (NDPA). The impact of joint venture capital intervention on the NIPA, NUMPA, and NDPA is 0.0874, 0.0635, and 0.1213, respectively. Hence, the intervention of joint venture capital can greatly promote the increase of Number of Patent Applications (NPA), especially, NIPA, and NUMPA. Compared with private venture capital, joint venture capital plays a greater role in promoting the growth of NPA and NIPA. Compared with private venture capital and foreign venture capital, national venture capital has a stronger innovation orientation and a longer investment cycle, which can greatly improve innovation performance, such as NIPA, while private venture capital and foreign venture capital have a less significant impact on enterprise innovation performance. The results demonstrate that the foreign capital sharing assessment based on the PSM model can be a good predictor of the performance of startups. It is hoped that the research results can provide a reference for the development of startups.

Venture capital and government involvement from a qualitative systematic literature review perspective

The financing of young start-up companies is hindered by market failures that prompt governments around the world to intervene at the venture capital market. The aim of this paper is to give a comprehensive overview on this research field based on sound systematic literature review methodology, which was never done before. We found three major themes: pure governmental venture capital involvement, governmental-private venture capital cooperation, and governmental involvement in the financing of pre-seed startups. The evaluation of the governmental efforts varies according to these themes and also the investigated geographic location. Generally, pure governmental venture capital is the most controversial theme, the government-private cooperation is mostly viewed in a positive light, while the authors almost unanimously praise the government’s efforts when financing pre-seed startups. We found that the success of governmental venture capital should not be judged based on the realized return of its investments, since profit maximalization is not its goal. The governments try to alleviate market failures at the venture capital market and transition financed startup companies to private financing. Thus, we advise researchers to use the number of this type of successful transitions as the success criteria of governmental investments.

Government Financing of R&D: A Mechanism Design Approach

We study how to design an optimal government loan program for risky R&D projects with positive externalities. With adverse selection, the optimal government contract involves a high interest rate but nearly zero cofinancing by the entrepreneur. This contrasts sharply with observed loan schemes. With adverse selection and moral hazard, allowing for two levels of effort by the entrepreneur, the optimal policy consists of a menu of at most two contracts, one with high interest and zero self-financing and a second with a lower interest plus cofinancing. Calibrated simulations assess welfare gains from the optimal policy, observed loan programs, and a direct subsidy to private venture capital firms. The gains vary with the size of the externalities, the cost of public funds, and the effectiveness of the private venture capital industry. (JEL D82, D86, G24, L26, O31, G32, H81)

Influence of Hybrid Legal Institutions on the Management in Local Government on the Example of the Institution of Public-Private Partnership

The basis for the matter discussed herein is the presentation of a new paradigm in modern law, i.e. the creation of hybrid legal institutions. The specificity of this construct consists in the combination of elements of public law and private law in order to achieve mutual benefits. Meeting these two interests is perfectly illustrated by the institution of public-private partnership. The essence of the partnership is the implementation of infrastructural projects in the public sphere by a private entity. A detailed analysis of this institution gives grounds to propose a thesis about the need to change the model of management in local government. The inclusion of private entities in the performance of tasks in the public sphere forces the verification of the traditional way of managing the local government staff. The participatory execution of tasks as part of hybrid legal institutions forces the officials to become more professional. This is the only way the public interest can be safeguarded in a public-private venture.

Sustainable Investments in Responsible SMEs: That’s What’s Distinguish Government VCs from Private VCs

Researchers question the impact of governmental venture capitalists (GVC) compared to private venture capitalists (PVC), but we know little about why this difference occurs and if this criticism is justified. We observed a group of GVCs and developed a new model that describes the way that GVCs process signals pre- and post-decisions. Certain macro level factors severely undermine micro level performance, causing GVCs to financially underperform with respect to PVCs. This helped us to understand that GVCs do not make investment decisions in the same way as PVCs, and what undermines the performance of GVCs’ decision-making processes. The main goals of GVCs are to promote investments in responsible SMEs, mobilizing societal impact. We discuss that the criticism of GVC needs to be more nuanced, as they have a different role than PVC in the financial system as providers of sustainable investments in responsible SMEs.

Startups in Russia: Ownership and performance

During two decades the Russian government has invested heavily in support of high-tech startups. However, considering high level of information opacity of startups, we focus on equity as the primary source of their financing, and on owners as the main source of support for such firms. This paper examines how ownership characteristics affect the performance of high-tech performance of startups in nuclear and space industries. We focus on how different types of owners (founders, state, and venture capital) contribute to performance of startups in nuclear and space industries. Using an unbalanced panel of startups from Skolkovo, the largest Russian innovation cluster, from 2010 to 2016, we found evidence of a negative relationship between a support from government-related organizations and chosen indicators of startup performance. Our findings confirmed the significant impact of private venture capital on startup performance, however the effect is industry-specific. While family equity contributions were not found to have a significant impact on startup performance, we identified a positive relationship between owner or CEO change and future startup performance. We discuss potential interpretations of the findings and provide strategic management insights for startup owners and investors.

The impact of national political culture on the Global development of Entrepreneurial ecosystems

Research background: Numerous attempts not only in the Russian Federation but also in many other countries to copy successful examples of the entrepreneurial ecosystem (EEs) from the USA did not lead to equally outstanding results. In scientific literature and in the media, the underestimation of the influence of informal institutions, also called cultural traditions of the country and business customs, is increasingly cited as a reason for that unfulfilled expectations. We postulate that the main reason for unfulfilled expectations lies in the underestimation of the influence of political culture. Purpose of the article: the goal is to prove the hypothesis that the prevailing culture of statism hinders the development of effective relationships between two key EEs actors - founders and venture funds. Methods: analysis of data from a wide range of publications by keywords and their classification into groups of factors that influence on EEs. Findings & Value Added: - The mature EEs dictates the rules to every new member, but the evolving EEs itself obeys the code of conduct that existed before it appeared. - The larger the share of state-funded startups, the stronger the distorting influence of the state in the sensitive period of EEs formation. - As a result of the contradiction that has arisen between the cultural environment and the need for security and support for startups, there is an outflow of startups to EEs with a friendly environment. This is the main reason for the lack of private venture capital in the country.

What qualities do government-owned venture capital investors seek in a new venture? A comparison of investment criteria across pre-seed, seed, and expansion stage startups

Private venture capital (VC) investors usually do not invest in early life-cycle stage startups such as seed and pre-seed companies, since investment size typically doesn’t reach investment thresholds. The entry of governments with fund managers to venture capital markets presents seed and pre-seed companies with the opportunity to receive funding. This paper examines the main investment preferences of Hungarian government-owned venture capital investors regarding pre-seed, seed, and expansion stage startups. Verbal protocol analysis enabled examination of the screening process in real-time in all three life-cycle stages. It is found that governmental VC funds mostly value financial indicators followed by market-related qualities while private VCs value these characteristics in alternate formation. However, in the pre-seed stage, the financial acumen and capabilities of management teams form the main criteria in similarity to angel investors. Governmental VCs also greatly seek innovational value in target firms.

Commercialization of Innovation by Western Universities

It is shown that the vast majority of foreign researchers consider university structures to be an important and economically sustainable mechanism for the transfer of new industrial technologies, that these structures accelerate the economic development of territories by creating new knowledge-intensive (high-tech) jobs, and increase tax revenues to local budgets. Thanks to government funding and public support, university research structures demonstrate higher survival rates compared to firms affiliated to corporate organizations. The structures affiliated to universities are very active in using state aid programs, remain residents of business incubators for longer, and are beneficiaries of funds supporting research and development. Private venture funds are more likely to finance them. University-affiliated structures are more innovative than firms associated with corporate organizations. These structures have a greater number of patented inventions, demonstrate a higher survival rate and a higher liquidity rating, but have lower profitability. University-related structures are innovative firms and can commercialize both specific inventions and more implicit knowledge obtained as a result of scientific research. It is noted that the biggest challenge for such a firm is the transformation of technological assets into marketable offers.