Title: Venture capital, initial public offerings and political economics: the case of Germany

Authors: Wolfgang Gerke, Ferdinand Mager

Addresses: Faculty of Business Administration, Economics and Social Sciences, Friederich-Alexander University Erlangen-Nuremberg, Lange Gasse 20, 90403 Nuremberg, Germany. ' Faculty of Business Administration, Economics and Social Sciences, Friederich-Alexander University Erlangen-Nuremberg, Lange Gasse 20, 90403 Nuremberg, Germany

Abstract: The availability of venture capital is closely linked to stock markets for young growth companies as an initial public offering is usually the most attractive exit channel. For decades the German economy was bank centred and stakeholder oriented. Inherent to the system, the capital market did not play a central role, and a market for venture capital basically did not exist. Since the 1990s, the German economy has undergone some fundamental changes. The old |Germany Inc.| is in the process of disintegration. With an increasing capital market orientation, the venture capital and IPO market almost gained ground automatically. The Neuer Markt, although very successful for several years, finally failed. We argue that the reasons go beyond the global downturn of the stock markets and are to be found in the system of political economics. In Germany, the political economic system is far from being a full-fledged capital market, outsider control system.

Keywords: venture capital; initial public offering; IPO; small and medium-sized enterprises; SMEs; financing; Neuer Markt; Germany; social market economy; entrepreneurship; innovation management; political economics.

DOI: 10.1504/IJEIM.2006.010375

International Journal of Entrepreneurship and Innovation Management, 2006 Vol.6 No.4/5, pp.429 - 443

Published online: 17 Jul 2006 *

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