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Venture Capital To Promote The Mechanism Of High-tech Industry Development Analysis

Posted on:2004-06-07Degree:MasterType:Thesis
Country:ChinaCandidate:S H WangFull Text:PDF
GTID:2206360122971945Subject:World economy
Abstract/Summary:PDF Full Text Request
Research on venture capital (VC) is attracting more and more scholars for its critical role in hi-tech industry and the need of theoretic and case research increases too. The purpose of this paper is to analyze VC's unique operation mechanism. The paper is structured into five sections.The first section undertakes a quick survey of VC's growth and illustrates two distinctive features, namely the leading role of the United States in pioneering VC and the very strong growth of hi-tech indushy during the past few years. The fact shows VC's significant performance of the economy and highlights the point that VC is an efficient instrument to develop hi-tech industry.The second section comments on the existing research achievements. In recent years, research on VC has achieved breakthroughs including: 1) motivation and movement of VC; 2) process of VC and the financial support to venture-backed firms; 3) property rights of VC and relationship among venture capitalists, venture capital investors and firms. Yet the existing research achievements are limited in the processes or facets of VC, there still lacks a theoretic system.The third section focuses on the analysis of VC's mechanism. It argues that, because of the key characteristics of hi-tech industry, there is information distort, delay or bias occurs. So correspondent mechanism is necessary to reduce the investment risk and increase the opportunities in raising capital. Its basic views include, 1) Venture capitalists are willing to accept higher risks than traditional, banks in exchange for potentially large gains from the sale of shares in the company. VC's investment strategy is adjusted in accordance with the development of the firm. 2) Venture capitalists are attracted to young, small fast-growing companies in need of capital and management expertise. By direct and indirect involvement in the design and execution of investment projects in innovation, VC help the firm overcome the barriers of credit constraints and knowledge gaps; facilitate the growth of promising small companies and the development and introduction of new products and technologies into the marketplace. Support provided in direct financial terms and indirect support provided in the form of advisory services, access to information and so on. 3 ) The change of product and technology will demand the correspondent adjustment for source structure of venture-backed firms. Venture capital's exit is a mechanism, which adapts to changes in venture-backed firm's development phases optimize.The fourth section briefly explains the relationship between VC and the growth of Intel. Computer-technology firms have been among the leading recipients of U.S. venture capital. VC's contribution to Intel shows that VC's mechanism is effective in expanding an early-stage company's productive capacity, helping a company add a new product line, or enabling a company to acquire an existing business.The final section summarizes the main findings of the study and discusses the measures of the reform of China's VC. Measures to be taken are: 1) to draw relevant legislation; 2) to establish an exit mechanism; 3) to guide pension funds into venture capital; 4) to create an environment can bear with failure and encourage innovation.
Keywords/Search Tags:venture capital, hi-tech industry, mechanism
PDF Full Text Request
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