The Role of Entrepreneurship Theory and Methods, Practice and Policy
Edited by Sameeksha Desai, Peter Nijkamp and Roger R. Stough
Chapter 3: A Contemporary Perspective on Public Sector Venture Capitalism
John Sacco and Odd J. Stalebrink 3.1 INTRODUCTION Supplying venture capital services in the form of provision of investment capital or credit guarantees has become an increasingly popular policy approach among governments worldwide to facilitate regional enterprise, especially among regions lagging in economic growth. The provision of these services is intended to provide a variety of economic, social and political functions and is often seen as a way to increase economic growth via so-called ‘smart targeting’. The funds set aside for these purposes are commonly – and hereinafter – referred to as regional enterprise funds. The goal of this chapter is to explore contemporary theories for purposes of conceptualizing issues related to the need for regional enterprise funds and the capacity of the public sector to allocate these funds successfully. Particular emphasis is placed on exploring the latter of these issues. Several theoretical perspectives are introduced to shed light on these questions, including theories on market failure, neoclassical and contemporary economic theory and third-party governance. The insight generated in this chapter will be useful not only for purposes of providing a review of the current state of the literature on entrepreneurship and economic development, but also in identifying important research hypotheses. The chapter is organized into five main sections. Sections 3.2 and 3.3 provide an introduction to regional enterprise funds and a discussion of the problem that these seek to address. Sections 3.4 and 3.5 introduce the above-mentioned theories for purposes of exploring the capacity of government to allocate regional enterprise funds...
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