European Central Bank - eurosystem
Search Options
Home Media Explainers Research & Publications Statistics Monetary Policy The €uro Payments & Markets Careers
Sort by

Giovanna Nicodano

31 January 2005
We study how public policy can contribute to increase the share of early stage and high-tech venture capital investments, thus helping the development of active venture capital markets. A simple extension of the seminal model by Holmstrom and Tirole (1997) provides a theoretical base for our analysis. We then explore a unique panel of data for 14 European countries between 1988 and 2001. We have several novel findings. First, the opening of stock markets targeted at entrepreneurial companies positively affects the shares of early stage and high-tech venture capital investments; reductions in capital gains tax rates have a similar, albeit weaker, effect. Second, a reduction in labor regulation creases the share of high-tech investments. Finally, we find no evidence of a shortage of supply of venture capital funds, and no evidence of an effect of increased public R&D spending on the share of high-tech or early stage venture capital investments.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G24 : Financial Economics→Financial Institutions and Services→Investment Banking, Venture Capital, Brokerage, Ratings and Ratings Agencies
H20 : Public Economics→Taxation, Subsidies, and Revenue→General
O30 : Economic Development, Technological Change, and Growth→Technological Change, Research and Development, Intellectual Property Rights→General
ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe"