Kiel Working Papers, Kiel Institute for World Economics
Under What Conditions Do Venture Capital Markets Emerge?
Abstract: Venture capital activity differs considerably across
countries. Venture capital markets are highly developed in few countries,
while these markets are almost nonexistent in many other countries. This
paper examines the conditions that have to be fulfilled for liquid venture
capital markets to emerge. Using a general equilibrium model, two necessary
conditions are identified. First, value added by venture capitalists
active involvement must be high compared to the costs of management
support. Second, the number of high-technology enterprises demanding
venture capital must exceed a critical level. The paper discusses how
differences in financial and innovation systems affect these two
Keywords: Management support, high-technology enterprises, venture capital finance; (follow links to similar papers)
JEL-Codes: G24; O16; O41; (follow links to similar papers)
22 pages, July 2002
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