Fiscal supporting policies for innovative projects in the early stages

Abstract

Abstract: The fiscal financing policies for innovative projects in the early stages are studied under the framework of incentive theory. The main conclusions are as follows: (1) In order to attract venture capital’s entry, the entrepreneurs must invest enough private capital to guarantee their efforts input. Thereby, when innovators are constrained by wealth, the financial support from government could encourage more innovation. (2)For the onerous funding policy that public capital asks for a pro rata sharing of project benefits, Pareto is inferior to gratuitous funding policy, while public capital just asks for a fixed payment is neutral in incentives, and has almost same features as gratuitous funding policy. Based on these findings, an interpretation that venture capitalists have the stage preference when they are choosing investment projects is given. Furthermore, the contradictory nature of business angel is pointed out and it is proved that the role of public capital for supporting innovative projects in the early stages is irreplaceable.

Key words: innovation project, venture capital, fiscal support, private capital

CLC Number:

F830.59

Xiong Weiqin, Ding Qian. Fiscal supporting policies for innovative projects in the early stages[J]. Science Research Management, 2012, (6): 24-30.

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