Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/17715
Authors: 
Schertler, Andrea
Year of Publication: 
2000
Series/Report no.: 
Kiel Working Paper 1018
Abstract: 
The relationship between a venture capitalist and an entrepreneur is modeled to investigate the impact of public subsidies on venture capital investments in start-up enterprises. In this model, the venture capitalist only finances start-up enterprises if he has sufficient expertise to make high-risk investments in new technology profitable in terms of their expected value. It is shown that a venture capitalist who already has sufficient expertise reduces his management support in the start-up enterprise under a public subsidy. Moreover, venture capitalists who do not have sufficient expertise may finance start-up enterprises if future losses of the start-up investment are partly covered by the government.
Subjects: 
venture capital
double-sided moral hazard
public subsidies
start-up investments
JEL: 
L14
G28
G24
D82
Document Type: 
Working Paper

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