When do subsidies facilitate high-tech firms' access to venture capital? An examination of cross-national and national grants
by Elmar Lins
International Journal of Globalisation and Small Business (IJGSB), Vol. 10, No. 3, 2019

Abstract: This study addresses the key question of how grant-based subsidies might serve differently as quality certificates for new technology-based firms (NTBFs) when trying to raise venture capital (VC). Therefore, we distinguish between cross-national, national, and sub-national subsidies. Based on the data of 1,568 German NTBFs, we apply a non-parametric matching procedure to control for the endogenous nature of subsidy reception. Our results show that cross-national grants have a strong certification effect, which reduces the information asymmetry between NTBFs and VC providers to the benefit of the new venture. Similarly, sub-national grants, awarded by regional government authorities, exhibit the same certification effect butless pronounced compared to cross-national grants. No significant effect can be observed for national subsidies.

Online publication date: Sun, 09-Jun-2019

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