Public intervention on the venture capital market in Poland over 1998–2014

Abstrakt

The ability of small firms to access finance is hindered by persistent market failure which creates funding gaps for new businesses, particularly in technology sectors, seeking small amounts of finance. This has prompted various forms of public sector intervention to increase the supply of both debt and risk finance. Intervention is based on the belief that small firms in general, and technology-based small firms in particular, are a key source of innovation, job creation and productivity growth. However, the ability of small firms to access finance is hindered by persistent market failures which create funding gaps. These funding gaps are greatest for new firms seeking external finance for the first time, for firms seeking small amounts of finance. The paper advocates that governments should invest in appropriate methodologies which can accurately measure investment trends in the early stage venture capital market so that the need for public sector intervention can be demonstrated and the impact of such interventions can be measured. The paper also analyse Polish venture capital market and government intervention and its influence for the market trends over the period of 1998–2014. The paper starts with a brief overview of the changing nature of government intervention in small firm finance markets. This provide a context for the main aims of the paper which are, first, to explain the rationale for supporting the informal venture capital market; and second, to describe and critically assess the forms of this intervention and how it has this evolved over time.