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 6: Institutional support for investment in new technologies: the role of venture capital institutions in developing countries

Sunil Mani and Anthony Bartzokas

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


Sunil Mani and Anthony Bartzokas INTRODUCTION Developing countries have over time emerged as leading producers and exporters of high-technology products. The share of developing countries in the total world exports of high-technology products has increased from about 8 per cent in 1988 to a little over 21 per cent in 1998 (Mani, 2000). However there is considerable concentration of this activity in a few developing countries from the Asian region. In fact about 95 per cent of the developing country exports of high-technology products are concentrated in just five developing countries: Singapore, Malaysia, Philippines, Thailand and Korea. During the same period, one also sees a significant increase in the innovative activity of these countries: the number of US patents granted to innovators from developing countries increased from about 1 per cent (of the world total) to about 6 per cent (Mani, 2002). The better performance, relatively speaking, of these countries is very often attributed to the particular kind of economic policy followed by their respective governments. This policy is usually charecterized by trading regimes highly open to both foreign trade and capital. But this line of reasoning does not pay any attention at all to the considerable efforts of these countries towards strengthening the ability of their domestic enterprises to enhance their technology generating efforts. The countries have put in place a number of institutional arrangements for this activity to flourish. While there are significant variations in the specific components of this policy across the...

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