Authors: Avi Messica, Tamir Agmon
Addresses: School of Business Administration, The College of Management, 7 Itzhak Rabin Boulevard, P.O.B. 25073, Rishon Le-Zion 75190, Israel. ' School of Business Administration, The College of Management, 7 Itzhak Rabin Boulevard, P.O.B. 9017, Rishon Le-Zion, 75190, Israel
Abstract: The high technology (hi-tech) sector has become an important factor for economic growth in many countries. Israel is an extreme case where most of the production of the hi-tech sector is exported, and moreover, comprises more than half of its industrial exports. In this study, we focused on the optimal funding of the public sector for the hi-tech industry in the presence of short-term, cyclical, venture capital funding. We addressed the first issue by constructing a decision-making model that results in the optimal governmental support for the hi-tech sector. For the latter issue, we constructed a model that accounts for the dynamics of the venture capital (VC) industry over 1995-2005. Our findings indicate that the VC industry is highly correlated with the NASDAQ composite stock index and that it is a supply-driven market. The optimal public sector|s policy for funding the hi-tech sector should be anti-cyclical, dynamic and conditioned on the VC investments as well as on the specific sector that is supported. The models and their validation against empirical data are presented and discussed as well as the practical implications for policy and decision-makers.
Keywords: public sector; government support; venture capital dynamics; investment; high technology; hi-tech sector; high-tech firms; Israel; decision making; modelling.
International Journal of Entrepreneurship and Innovation Management, 2009 Vol.10 No.3/4, pp.227 - 242
Published online: 23 May 2009 *Full-text access for editors Access for subscribers Purchase this article Comment on this article