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The conditions for successful manufacturing have changed considerably in recent years. New technologies such as information technology and biotechnology are considered important players in eradicating poverty in developing countries, but the risky nature of projects based on new technologies forces firms to raise investment capital by means other than conventional capital markets.
This book examines the role of venture capital institutions in financing technology-based ventures both in developed and developing countries. It also explores that part of venture capital activity which is hitherto vastly under-researched; namely the ability of venture capital institutions to render a whole host of value-added support functions. These include setting up management teams and designing strategic plans for fledgling enterprises. The latter issue is operationalized through a series of carefully chosen case studies.
Financial Systems, Corporate Investment in Innovation, and Venture Capital will be a valuable text for scholars and students of the theory and practice of financing innovation. It will also be a valuable source for governments, NGOs, financial institutions and multilateral agencies interested in the practicalities of promoting technology-based small and medium enterprises.
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Financial Systems, Corporate Investment in Innovation, and Venture Capital
Financial Systems, Corporate Investment in Innovation, and Venture Capital Edited by
Anthony Bartzokas Professor of Development Economics, University of Athens and Researcher, United Nations University–Institute for New Technologies, Maastricht, The Netherlands and
Sunil Mani Researcher, United Nations University–Institute for New Technologies, Maastricht, The Netherlands
Edward Elgar Cheltenham, UK • Northampton, MA, USA
© Anthony Bartzokas and Sunil Mani 2004 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc. 136 West Street Suite 202 Northampton Massachusetts 01060 USA
A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data Financial systems, corporate investment in innovation, and venture capital / edited by Anthony Bartzokas and Sunil Mani. p. cm. Includes bibliographical references. 1. Venture capital. 2. High technology industries—Finance. I. Bartzokas, Anthony, 1962– II. Mani, Sunil. HG4751.F55 2004 332.04154—dc22
2003064350
ISBN 1 84376 392 3
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
Contents vi vii
Preface List of contributors 1
Introduction Anthony Bartzokas and Sunil Mani
1
2
The financing of research and development Bronwyn Hall
7
3
The financing and governance of new technologies Colin Mayer
32
4
The globalization of venture capital: the cases of Taiwan and Japan Martin Kenney, Kyonghee Han and Shoko Tanaka
52
5
Targeting venture capital: lessons from Israel’s Yozma program Gil Avnimelech and Morris Teubal
6
Institutional support for investment in new technologies: the role of venture capital institutions in developing countries Sunil Mani and Anthony Bartzokas
117
Financial systems, investment in innovation, and venture capital: the case of China Steven White, Jian Gao and Wei Zhang
159
7
85
8
Venture capital and innovation: the Indian