Public versus private venture capital: seeding or crowding out? A pan-European analysis

• Published in: Journal of business venturing Vol. 18; no. 1; pp. 81 - 104
• Main Authors: Leleux, Benoı̂t, Surlemont, Bernard
• Format: Journal Article Web Resource
• Language: English
• Published: New York Elsevier Inc 2003; Elsevier; Elsevier Sequoia S.A; Elsevier BV
• Series: Journal of Business Venturing
• Subjects: Business & economic sciences; Business and International Management; Correlation analysis; Entrepreneurs; Entrepreneurship support; Management of Technology and Innovation; Private sector; Public interventions; Public sector; Sciences économiques & de gestion; Seed funds; Signaling; Studies; Venture capital; Europe; Signaling; Seed funds; Public interventions; Venture capital; Entrepreneurship support
• ISSN: 0883-9026; 1873-2003; 1873-2003
• DOI: 10.1016/S0883-9026(01)00078-7

This paper analyzes the relationship between public and private sources of venture capital in Europe and the development of the industry, controlling for characteristics of the legal systems, in 15 European countries over the period 1990–1996. Large public participation is correlated with smaller VC industries, but analyses do not support the view that public venture capitalists are acting to seed the industry or that are they crowd-out private funds. On the contrary, public involvement seems to cause greater amounts of money to be invested in the industry as a whole. We argue that the effects of public intervention, whatever the motives, are real and probably result from demonstrating/sanctioning the social merit of venture capital and from signaling an enduring commitment to it.