Government as fund-of-fund and VC fund sponsors: Effect on employment in portfolio companies
Manigart, Sophie Standaert, Thomas
Manigart, Sophie
Standaert, Thomas
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2018
Journal
Small Business Economics
Book
Publication Volume
50
Publication Issue
2
Publication Begin page
357
Publication End page
373
Publication NUmber of pages
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Abstract
Governments around the world have set up fund-of-fund programs to increase the supply of venture capital financing to young growth-oriented firms. In these programs, a government fund-of-fund acts as limited partner in a venture capital fund. The venture capital investment process is hereby delegated to external investors, which were selected by the government fund-of-fund. We investigate employment growth in 108 portfolio companies that benefited from the ARKimedes fund-of-fund in Flanders. Accounting for the heterogeneity in the types of venture capital investors managing hybrid funds, and the associated goal diversity and resource endowments, we find that portfolio companies backed by hybrid independent venture capital funds show greater employment growth than those backed by hybrid captive or hybrid government venture capital funds. This finding is relevant because it indicates that the financial objectives of hybrid independent venture capital funds are highly compatible with the government's objective of employment growth, as providing companies with superior monitoring and value adding services with the objective of realizing a successful exit creates employment in the process.
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Keywords
Public Policy, Venture Capital, Hybrid Funds, Employment Growth