Chapter 4: Venture Capital and Government Policy
Gordon C. Murray Introduction It is instructive to observe that all venture capital markets of which we are aware were initiated with government support. These markets do not appear to emerge without some form of assistance. This leads to the question as to what it is that requires the need for government support in these markets, at least in their formative stages. (Lerner et al., 2005) The above quote is taken from a contemporary evaluation of public venture capital activity in New Zealand. It is one of a number of formal reviews of early-stage venture capital activity that have recently been concluded by government policy makers with the assistance of academic researchers.1 The authors of the New Zealand evaluation suggest that, despite venture capital being a ﬁnancing instrument most widely associated with the ‘animal spirits’ of the free market and of entrepreneurial agents unrestricted by public interference, the state may well have an important role in both initiating risk capital programs as well as providing a conducive environment for the seeding and commercial growth of such activity. This view of the importance of government commitment to entrepreneurial action, particularly in nascent (usually new knowledge or new technology-derived2) industries, has support from several academic researchers (Bottazzi and Da Rin, 2002; Lerner, 2002; Gilbert et al., 2004; Page West III and Bamford, 2005) who see evidence of a signiﬁcant increase of public initiated and ﬁnanced venture activity on an international scale. Venture capital and the role of public actors may be...
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