Essay on Venture Capitalism in Eastern Europe

Essay on Venture Capitalism in Eastern Europe

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Beginning with the work of researchers as Jaffee and Russell (1976) and Stiglitz and Weiss (1981), the arguments in favour of existing market imperfections that cause difficulty for firms to obtain external financial resources in addition to the internal ones, representing the main constraint on investment decisions, have gained a special attention in the literature. The firms involved in technological innovation may be the most affected by the financial market imperfections that characterize also bank financing (Carpenter and Petersen, 2002). In general, banks lack the skills for ex-ante evaluation and ex-post monitoring of investment projects developed by innovative enterprises. Although, in principle, adverse selection and moral hazard can be mitigated by providing guarantees to creditors (Berger and Udell, 1998), significant proportions of intangible assets in the total assets held by the high R&D intensity firms reduce their access to bank financing. Reduced access to the traditional external resources limits funding and threatens innovative companies to grow. Venture capitals are, generally, considered to be the most appropriate financial resources for the small and medium-sized enterprises (SMEs) that innovate technologically. Venture capital firms do not only provide resources for financing of projects, but they give also experience in research activities and diffusion of innovations, shaping the company's business strategy.
This study contributes by characterising the venture capital market and factors with impact on investments made in Romania. Of the latter perspective, we introduce macroeconomic factors identified in the literature. However, there are few studies devoted to the identification of factors affecting the ...


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...), “Assessing the contribution of venture capital to innovation”, RAND Journal of Economics 31, pp. 674–92.
OECD (2006), The SME Financing Gap: Theory and Evidence (Vol, 1), OECD.
OECD (2004), Promoting entrepreneurship and innovative SMEs in a global economy; towards a more responsible and inclusive globalisation, OECD.
Poterba J. (1989), ”Venture capital and capital gains taxation”, in Summers. L. (ed.) ”Tax Policy and the Economy”, MIT Press Cambridge MA.
Romain A., van Pottelsberghe B. (2004), ”The determinants of venture capital: a panel analysis of 16 OECD countries”, Discussion paper No. 19, Universite Libre de Bruxelles.
Schertler A. (2003), ”Driving forces of venture capital investments in Europe: a dynamic panel data analysis”, European Integration. Financial Systems and Corporate Performance (EFIC) Working Paper No. 03-27, United Nations University.

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