Financial Systems, Corporate Investment in Innovation, and Venture Capital

Financial Systems, Corporate Investment in Innovation, and Venture Capital

Edited by Anthony Bartzokas and Sunil Mani

This book examines the role of venture capital institutions in financing technology-based ventures both in developed and developing countries. It also explores that part of venture capital activity which is hitherto vastly under-researched; namely the ability of venture capital institutions to render a whole host of value-added support functions. These include setting up management teams and designing strategic plans for fledgling enterprises. The latter issue is operationalized through a series of carefully chosen case studies.

Chapter 4: The globalization of venture capital: the cases of Taiwan and Japan

Martin Kenney, Kyonghee Han and Shoko Tanaka

Subjects: economics and finance, economics of innovation, financial economics and regulation, innovation and technology, economics of innovation


Martin Kenney, Kyonghee Han and Shoko Tanaka INTRODUCTION At the beginning of the 21st century, the importance of venture capital for the funding of new high-growth potential firms is universally recognized. Many of the defining US firms of the last three decades, including 3Com, Amgen, AMD, Compaq, Cisco, Federal Express, Genentech, Intel, Oracle and Sun Microsystems, were first funded by venture capitalists. Even more than providing funding for firms, venture capital has become a central institution in some of the most dynamic, innovative firm clusters in the world. In the last two decades, venture capital investing has diffused internationally: there are now 35 national venture capital associations. Though the USA continues to be the center of the venture capital industry, there are hot spots of activity in a number of developed and a few less developed nations, nearly all of which are in Asia. This chapter discusses this globalization process and then examines the growth of venture capital in two countries, Japan and Taiwan. The diversity of nations in terms of their national systems of innovation, levels of entrepreneurship, political economic development, varying labor practices, corporate ownership regulations, educational achievement and business cultures means that each country’s venture capital industry has a different evolutionary trajectory. To understand the hybridization of venture capital in different environments, we first construct an ideal type of venture capital drawn from the US experience. This chapter has seven sections. The first section discusses the history, development and operation of venture capital...

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