CEU Electronic Theses and Dissertations, 2022
| Author | Milos |
|---|---|
| Title | Venture Capital in Hungary: Provision of Assistance to Hungary-based Investee Firms |
| Summary | This study presented evidence on the role of venture capital finance in entrepreneurial processes and development of resources and capabilities of Hungary-based investee firms from management and public policy perspectives. Its results indicated that venture capitalists were an important source of external knowledge for Hungary-based early-stage firms. The processes of post-investment assistance are important knowledge-sharing processes, since they entail efficient and timely transfer of valuable information among market participants, with implications for innovativeness, time-to-market, competitive advantage, competitiveness and performance of early-stage firms. An important aspect of this study is its blended research methodology, applying both an initial quantitative and a follow-on qualitative investigation of processes of post-investment assistance of venture capitalists and their implications, which complemented one another. This blended research approach added robustness to this study and its conclusions. With regard to public policy considerations, this study offered a comparative analysis of the assistance provided by private and government venture capitalists to Hungary-based investee firms. This study indicated that differences in qualities of Hungary-based private and government venture capital-backed firms were emphasized by a different treatment effect of private and government venture capital finance. The evolution of Hungarian venture capital market has had a unique, discontinuous and, at times, volatile trajectory. The most recent policy shift in Hungary, which triggered the oversupply of government venture capital finance since 2016, was sharply in contrast to the ‘market principle’ that played a central role in the policies stimulating the expansion of Hungarian entrepreneurial sector in the aftermath of the global financial recession. By 2020, the relative size of Hungary-based government venture capital-backed sector became one of the largest in Europe. This study indicated that there were many anticipated and unanticipated economic and societal consequences of the expansion of government venture capital in Hungary that required further research. The collected data indicated that the expansion of government venture capital finance had a number of negative outcomes, led to displacement of entrepreneurial processes and was ineffective in supporting innovative firms. Activities of Hungary-based government venture capitalists were not limited to fixing financing gaps and providing finance to firms systematically unattractive to private venture capitalists. Instead, government venture capital was oversupplied, inflating the expectations of entrepreneurs, while its availability was counterproductive in improving competitiveness of the entrepreneurial sector in Hungary. The collected data suggested that further expansion of government venture capital could enhance already prevalent market failures of Hungarian entrepreneurial sector. The study highlighted the complexity of organizing resources for early-stage firms, where management perspectives and a private sector business experience had a critical role. Government venture capital sector was characterized by a limited access to the labour market of experienced talent and inefficient processes. The collected information indicated that government venture capitalists were less efficient in post-investment monitoring of Hungary-based investee firms, relative to private venture capitalists, due to lacking a sufficient number of experienced managers and efficient processes to monitor and assist high number of investee firms, which they were committed to invest in, by the policy directive. An important aspect of the scholarly contribution of this study is its eclectic approach to studying venture capital finance, which utilizes perspectives from management, strategy, organizational behaviour, public policy and economics. |
| Supervisor | György Bőgel |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2022/milicsevics_milos.pdf |
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