Venture Capital, Financial Innovation And New Economy

The U.S. made glorious economic achievements in the 1990s , especially in later 1990s and there emerged many new phenomena having never been perceived before, which led to discussion in Business Week at the end of 1996 and the introduction of the notion of "New Economy". From then on, the U.S. and other countries, including circles of academy, business and government in China have attached great importance to issues related to "New Economy", which have become key issues widely studied and heatedly discussed. As is known to us all, innovation is the core of New Economy and it is the key power of technological progress. Many New Economy ventures such as IBM, Microsoft, Intel, Apple, Yahoo and so on are the very results of innovational idea, relying on the support of capital market, especially on the assistance of a completely different new pattern of finance relation -venture capital. To a great degree, we can say that venture capital is a hero in spurring American New Economy ventures on to growth. By giving an impetus to the vigorous growth of the ventures, venture capital further powers the development of the whole economy; therefore venture capital is regarded as "driving force of venture businesses", "catalyst of New Economy", whose role and importance are self-evident. However, venture capital has subsequently met with misfortune as the New Economy is under great adjustment in the overlapping period of two centuries, saying goodbye to enthusiastic days and getting into its phase of downturn.Under the very setting, the thesis works on the origin and growth of venture capital in terms of financial innovation and New Economy. Its core subjects are venture capital, financial innovation and New Economy.The thesis is organized as follows:Section One discusses financial innovation of venture capital. Starting with the definitions of venture capital, it explores its innovational connotation , explains the necessity of venture capital by means of financial innovation theory afterwards, discusses the limitations of the theory in this regard, and finally points out that theNew Economy theory can better demonstrate the emergence of venture capital.Section Two addresses New Economy rules. It looks into the New Economy rules from the perspective of consumption and production, comes to the conclusion that the New Economy is positive feedback economy, and analyzes business growth pattern and business behavior in this kind of economy.Section Three surveys the relationship between New Economy and venture capital. It proceeds in terms of human capital, financial capital and risks and then reveals that venture capital is mutually related with New Economy.Section Four focuses on institutional innovation and performance evaluation of venture capital. From the angle of new institutional economics, it investigates the principle of venture capital's institutional innovation, evaluates its institutional performance, analyzes its institutional faults, and at last suggests that venture capital is not necessarily the best choice but an expedient in the new situation and there may exist a few imperfectness in itself and thus failure appears similar to "market failure" or "government failure".Section Five triggers some views on the development of China's venture capital industry. It gives some suggestions on the growth of China's venture capital industry by using the experience of other countries for reference.The thesis has some contributions and innovations. It attempts to explain the theory of venture capital from a new standpoint. The existing researches on financial innovation, venture capital and New Economy are independent from one another, or at least, we may say they are not so closely related. In the presence of venture capital, financial innovation and New Economy, the thesis discusses the symbiosis between venture capital and New Economy in the long run.