To the Rescue: Government Intervention in Venture Capital Markets

Abstract

Research on direct government intervention in venture capital (VC) markets has expanded rapidly over the last decade. This chapter reviews the extant literature on direct government intervention in VC markets, providing a classification of existing studies according to the three identified types of direct government intervention under analysis. As such, this chapter provides an assessment of the degree to which the government’s objectives of alleviating the equity gap and generating social returns have been achieved by these three types of direct intervention. Furthermore, this chapter highlights how future research on the interrelationships between governments, private VC investors, portfolio companies, and the external environment, offers the potential to increase the effectiveness of direct government intervention in VC markets.