Title: When do subsidies facilitate high-tech firms' access to venture capital? An examination of cross-national and national grants

Authors: Elmar Lins

Addresses: Heinrich Heine University Düsseldorf, Universitätsstraße 1, D-40225 Düsseldorf, Germany

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.

Keywords: public subsidies; grants; subsidies; cross-national subsidy; national subsidy; venture capital; venture capital access; new ventures; high tech start-ups; technology based firms.

DOI: 10.1504/IJGSB.2019.100119

International Journal of Globalisation and Small Business, 2019 Vol.10 No.3, pp.191 - 209

Received: 23 Nov 2017
Accepted: 14 May 2018

Published online: 09 Jun 2019 *

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