Venture Capital, the Public Sector, and the High-Technology Industry
International Journal of Innovation and Technology Management, Vol. 5, No. 1, pp. 105-122, 2008
20 Pages Posted: 13 Aug 2008
Date Written: May 13, 2007
We studied the optimal funding of the public sector for the Hi-Tech industry in the presence of short-term, cyclical, venture capital (VC) funding by constructing a decision-making model that results in the optimal governmental support and a model that accounts for the dynamics of the VC industry. We found that the VC industry is highly correlated with the NASDAQ stock index and that the optimal public policy for funding the Hi-Tech sector should be anti-cyclical, dynamic, and conditioned on the VC investments. The models and their validation are discussed as well as the practical implications for policy and decision makers.
Keywords: Public sector, Government, Venture Capital, Investment, High Technology, Hi-Tech
JEL Classification: O10, O30, O31, O32, O33, O38
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