Edited by Anthony Bartzokas and Sunil Mani
Chapter 5: Targeting venture capital: lessons from IsraelÂês Yozma program
5. Targeting venture capital: lessons from Israel’s Yozma program Gil Avnimelech and Morris Teubal INTRODUCTION This chapter deals with policies promoting venture capital, particularly, although not exclusively, targeted incentives programs aimed at VC emergence, such as Israel’s Yozma program (successfully implemented during 1993–7). Its focus is policy issues suggested by the Israeli experience. In Israel, the VC industry did not arise in a vacuum; rather it evolved from a prior setting of high-tech and R&D/innovation capabilities. In contexts of this kind Israel’s experience (or parts of it) may be relevant. This experience also suggests that a VC-directed incentives program should not represent the central thrust of government policy aimed at creating a completely new high-tech sector (Gelvan and Teubal, 1997). The chapter builds upon prior earlier work on Israel’s VC and high-tech industries. It also links with a long tradition of research on VC covering both ‘positive’ and ‘normative’ aspects. Background Research on Venture Capital The literature of the 1980s, such as Florida and Kenney (1988a, 1988b) focuses on the roles that VC played in the innovation process of the USA. VCs are active investors and are integrally involved in the creation of startup companies; they are involved in four overlapping networks of innovation: ﬁnancial institutions, local and global technology markets, professional business service markets and professional labor markets. During the 1990s we observe at least two strands of literature. The ﬁrst analyzes how the operation of VC, its mechanisms and organizational capabilities, helped overcome the ‘lemon’ problem...
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