Capital Commerce

Industrial Policy For Venture Capital?

June 18, 2009 RSS Feed Print

Dr. Scott Shane--who used to do some blogging for US News--has started a blog on entrepreneurship at the New York Times. His first post considers the idea that Congress should make venture capital-backed firms eligible for Small Business Innovation Research grants. He says it's a good idea, but only if the federal government is honest enough to admit that the program would no longer be a free-market one, but the government picking winners among start-ups:

The market failure problem doesn’t influence venture-capital-backed start-ups. By definition, V.C.-backed companies pursuing innovations do not face market failure because the private sector is financing them. So where does this leave me? I’m in favor of the government making V.C.-backed start-ups eligible for S.B.I.R. grants but only if it is willing to own up to what the change in policy represents — a change in philosophy from one of government intervention to prevent market failure to one of industrial policy designed to get the maximum return from government investments in entrepreneurship.

« Previous Post Next Post »

Reader Comments Read all comments (4)

Add Your Thoughts Comment Name State Email

Please enter the two words below into the text field underneath the image.

Your comment will be posted immediately, unless it is spam or contains profanity. For more information, please see our Comments FAQ.

The best industrial policy would be for the federal government to downsize, repeal most regulations, stop borrowing, cut taxes, and most importantly, establish a sound, honest unit of currency.
Most of what the government has done for the past 70 years has been designed to benefit one special interest after another, at the expense of all the rest. A web of regulations and taxes and quotas ensnare anyone who wants to make an honest living. To make matters worse, the Fed is constantly tinkering with the money supply.
I say to all the would-be geniuses who want to help kickstart the economy, leave us alone! To all those who say that deregulation got us into this mess, have a closer look at the Federal Reserve System: it has its dead finger on the scale of every bank and financial institution in this country, and many abroad. The entire economy is pumped full of money whenever it seems politically expedient; this Fed-generated inflation is the cause of the systemic instability which is sloshing around and making a mess of everything.

terrymac of CA 11:35PM June 25, 2009

The government doesn't need to do more to encourage venture capital. All it needs to do is remove Sarbanes Oxley, which has had a devastating effect on start-ups going public, due to enormous new regulatory compliance costs.
You can blame the pro-regulation people for Sarbanes-Oxley.

Mike of AK 6:38PM June 25, 2009

As a small startup I'll take any money they shove my way. Folks who stand on principle are fine and all, but an entrepreneur who wants to be successful can't turn down $ no matter who is forking it over. And if government doesn't give me $ because they aren't interested in my market sector... that's different from now, uhm, how?

Badtux of CA 10:56PM June 18, 2009

Industrial Policy For Venture Capital?

Reader Comments Read all comments (4)

Capital Commerce

Subscribe

Editor's Picks