Towards the Framing of Venture Capital Policies: a Systems-Evolutionary Perspective with Particular Reference to the UK/Scotland and Israeli Experiences

We compare some of the policies that have been attempted in Europe (UK/Scotland) and Israel over the past fifteen years to elaborate a new Systems Evolutionary (SE) framework for rethinking VC policy and related ITP. We argue that this perspective is useful for both real world (‘positive’) analysis and policy (‘normative’) analys is. Our SE framework is shaped by (i) a multidimensional view of VC; (ii) strong between VC, VC policy and the development of EHTCs; and (iii) a strategic approach to policy. In contrast, many VC policies in Europe up to and including the 1990s took a ‘static’ financial view of VC that focused on ‘bridging existng early phase finance gaps of innovative companies’ rather than creating of a new mechanism to assure the timely growth of EHTCs. We aim to present the new framework rather than to provide specific recommendations. The main conclusion is that the success of VC policies depend on factors such as the phase of evolution of (i) VC or related innovation finance organizations; (ii) the underlying segment of start up companies and of high tech industries; (iii) the specific country/region institutional setting. While in some contexts it may be worth considering the targeting of a new VC industry/market (and associated EHTC) in others the focus of policy should center in improving pre-emergence conditions. More specifically it may be, given that VC searches for ‘investment ready opportunities’, that ITP should, in many contexts, precede VC policies. Another key conclusion is that implementing this perspective necessitates the creation of a strategic level of policy, with a view of specifying a set of strategic priorities for Scie nce, Technology, and Innovation, priorities that should precede rather than follow policy design and implementation. A major challenge is to extend the present framework that was initially based on VCs oriented towards ICT to LS.

Innovation and technology policy (ITP) for catching up: a three phase life cycle framework for industrializing economies

Includes bibliographyThis paper outlines a dynamic, medium/long term Innovation and Technology Policy framework for industrializing economies directed to simulate innovation and to contribute to the eventual creation of high impact innovative entrepreneurial clusters. The paper is predicated on the assumption that while cluster creation policies are possible in many contexts they requires adoption of a System Evolutionary (S/E) perspective to Innovation and Technology Policy. Given the current 'entrepreneurial phase' of the ICT Revolution, support of 'Innovative SMEs' should be one of the axes of an overall strategy of development for a large group of industrializing economies. The three phase policy model proposed here starts with direct Government support, including Horizontal support to Business Sector R&D/Innovation and/or to innovative Small and Medium Sized Enterprise or Start Ups (Phase 1); and culminates with implementation of Targeted or other policies in support of Venture Capital (VC)/ Private Equity (PE) and possibly of other industries. Between these two central policy thrusts an intermediate phase 2 would be implemented with the objective of reinforcing innovation and creating other favorable conditions, including favourable 'demand' conditions and enhanced policy capabilities, for a successful transition to Phase 3. The model is a generic model which allows for different variants reflecting different country contexts, although, throughout, it will emphasize the importance of direct Business Sector support mechanisms at least during Phases 1 and 2. The structure of the policy portfolio will depend on country characteristics and specific institutions; and its changes over time will also reflect in part differences in the policy objectives from phase to phase. As it stands the framework is neither 'formal' nor 'appreciative theory' that is theory which closely follows the facts. This is the result of the paucity of data and the impossibility of undertaking at this stage a cross-country comparative analysis of policy cycles. Still the model as it stands can provide useful pointers to policymakers in a variety of contexts

CO-EVOLUCIÓN ENTRE CAPITAL DE RIESGO, NUEVAS FIRMAS Y EL SURGIMIENTO Y DESARROLLO DEL NUEVO CLUSTER DE ALTA TECNOLOGÍA DE ISRAEL

This paper provides an account of the emergence and development of a Venture Capital Industry in Israel, and the role it played in the recent successful growth of Israel’s high tech cluster. The paper discusses the co-evolutionary and dynamic process involving the business sector, technology policies, vanture capitalists, individuals and Startup companies, and foreign linkages.We attempt to show that VC emergence is part and parcel of the reconfiguration of a pre-existing Electronics Industry one involving large amounts of SU and new and powerful links with global capital markets. The main conclusions and policy lessons of the paper are that specific technology policies targeted to the Venture Capital sector can be effective only to the extent that favourable background conditions exist or are created.Este trabajo da cuenta del surgimiento y desarrollo de una Industria de Capital de Riesgo en Israel y del rol que ésta jugó en el crecimiento exitoso reciente del cluster de alta tecnología de Israel. Discute el proceso coevolutivo y dinámico que involucra al sector comercial, políticas de tecnología, capitalistas de riesgo, compañías individuales y nuevas firmas, y vínculos con el extranjero. Intentamos mostrar que el surgimiento del CR es parte integrante de la reconfiguración de una Industria Electrónica preexistente, que involucra grandes cantidades de NF y nuevos y poderosos vínculos con los mercados globales de capitales. Las principales conclusiones y lecciones de política del trabajo indican que políticas específicas de tecnología dirigidas al sector de Capital de Riesgo pueden ser efectivas sólo en la medida que existan, o sean creadas, condiciones previas favorables.&nbsp

MNE Spinoffs and Cluster Development and Growth

Atlanta Conference on Science and Innovation Policy 2009This presentation was part of the session : Globalization of Science and InnovationThe economic success of well-known innovative industrial clusters such as Silicon Valley and Route 128 has fostered attempts to transform local economies to successful industrial clusters (Feldman, 2001; Feldman & Francies, 2004). Recently, few researchers introduced dynamic cluster development models such as Avnimelech and Teubal (2006); Bresnahan et al. (2001), Feldman (2001); Feldman and Francies (2004); Feldman et al. (2005), and Menzel and Fornahl (2007).Kaufmann Foundatio

Strength of Market Forces and the Successful Emergence of Israel's Venture Capital Industry. Insights from a Policy-Led Case of Structural Change

Through a microeconomic analysis of companies in Israel? Venture Capital (vc) industry this paper aims to contribute to the discussion of targeted policies directed to the emergence of new industries, particularly but not only Venture Capital and High Tech industries. It integrates a firm-level dimension to previous work on vc Emergence which was wholly conducted at the industry or meso-economic level. The central contribution of the paper is the notion of ¿Class A Market Forces¿ which our analysis shows characterized vc companies and vc-related activity during pre- and ¿early¿ Venture Capital emergence in Israel. The paper argues that this ¿high quality¿ feature of ¿early¿ market agents in the area was an important factor in the successful policy-led emergence of Israel? vc industry. The theme is part of a wider agenda of analyzing two types of links and related co-evolutionary processes: those between Structural Change, particularly policy-led Structural Change, and Economic Growth; and in a more indirect fashion, between Economic Growth on the one hand and the successful implementation of high-impact targeted ¿industry emergence¿ policies on the other.

Co-evolución entre capital de riesgo, nuevas firmas y el surgimiento y desarrollo del nuevo cluster de alta tecnología de Israel:

Se aborda el proceso coevolutivo y dinámico que involucra al sector comercial, políticas de tecnología, capitalistas de riesgo, compañías individuales y nuevas firmas, y vínculos con el extranjero. Se muestra el surgimiento del CR es parte integrante de la reconfiguración de una industria electrónica preexistente, que involucra grandes cantidades de NF y nuevos poderosos vínculos con los mercados globales de capitales. Las principales conclusiones y lecciones de política del trabajo indican que políticas específicas de tecnología dirigidas al sector de capital de riesgo pueden ser efectivas sólo en la medida que existean, o sean creadas, condiciones previas favorables